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Activision misses, 3DO tops 4Q estimates

Activision (Nasdaq: ATVI) fell short of its own downwardly-revised expectations in the fourth quarter, and lowered its prediction for the fiscal 2001.

After market close Tuesday, the game software maker reported fiscal fourth quarter net income of 1 million, or 4 cents per share, excluding restructuring costs. First Call's recently lowered consensus estimate predicted a profit of 9 cents per share.

Including $70 million in charges related to the company's previously announced restructuring, Activision lost $34 million, or $1.38 per share.

For the full fiscal 2000, Activision reported net income of $20 million, or 74 cents per share, excluding special charges. Last month, Activision said it expected full year earnings growth of 20 percent, which would have translated into 79 cents per share.

Fourth quarter revenue of $116 million was up slightly from $115 million in the year-ago period. For the year, Activision's revenue increased 34 percent to $584 million from $436 million in fiscal 1999.

Activision predicted fiscal 2001 revenues for the industry and the company itself would fall 10 percent year-over-year, excluding restructuring charges. The company sees its EPS, outside of special charges, falling 30 percent from fiscal 2000 as it boosts spending on software for next-generation platforms even as software retail prices fall.

Restructuring costs for Activision include $11 million in writedowns of goodwill related to the acquisition of TDC in 1992; $26 million for goodwill amortization from the purchase of Expert Software; $16 million for ending certain product lines; $11 million to restructure the company's publishing infrastructure; and $6 million for additional provisions for accounts receivable and inventory.

Top-selling games during the quarter for Activision included Tony Hawk's Pro Skater; Toy Story 2; Quake III Arena; Big Game Hunter III; Blue Stinger; and Tarzan for Nintendo's Game Boy.

"This year, we achieved our goal of becoming a market leader on every significant platform," said Robert Kotick, Chairman and CEO. "We attribute these achievements to our strong brands as well as the success of our cross-platform strategy. We believe that the momentum we created this year will enable us to capitalize on the market opportunities presented by the next -generation console game systems and the Internet."

Also Tuesday, Activision announced a buyback of up to $10 million of common stock. The company plans to finance the purchase of shares and notes with available cash.

Shares of Activision fell to 6 1/8 in afterhours activity on the Island electronic communications network. The stock closed Tuesday's regular trading at 7 9/32, down 7/32 for the session.

Activision is the fifth company in the last two months to report or warn of disappointing financial results, joining Midway Games (NYSE: MWY), 3DO (Nasdaq: THDO), Acclaim Entertainment (Nasdaq: AKLM) and Interplay (Nasdaq: IPLY). Calendar 2000 was expected to be a down year for the game software industry, as consumers wait for Sony (NYSE: SNE) to release the Playstation 2 console outside Japan.

Other companies reporting quarterly results Tuesday:

  • 3DO
  • (Nasdaq: THDO) exceeded lowered expectations for the fourth quarter.

    The maker of game software reported fiscal fourth quarter earnings of $11.5 million, or 26 cents per share, two cents above First Call consensus and a penny above the top end of the range predicted by 3DO in its earnings warning last month.

    Fourth quarter revenue of $47.3 million was more than double from the year-ago period. Gross

    For the full fiscal 2000, 3DO earned $200,000, or a penny per share, on revenue of $122.2 million.

    "As we said several weeks ago, our goals for fiscal 2001 are designed to sustain our momentum in the coming year and leverage the continued demand for quality, high-performance games," said Trip Hawkins, chairman and CEO of 3DO. "Our new game roll-out schedule remains aggressive, with 50 new games planned across at least six platforms."

    3DO intends to roll out games for Playstation 2 and the Internet during fiscal 2001, Hawkins said. The company also wants to expand outside the United States.

    • Playstation wait holds down game stocks>