Activision Announces Record First Quarter 2008 Results

First Quarter Net Revenues Increase 163% and EPS Hits All Time Q1 High - - Company Increases Fiscal 2008 Net Revenue and EPS Outlook - - Company Expects To Deliver Record Fiscal Year Operating Margin

SANTA MONICA, Calif., Aug 02, 2007 - Activision, Inc. (Nasdaq:ATVI) today announced record financial results for the first fiscal quarter ended June 30, 2007.

Net revenues were $495.5 million, a 163% increase, as compared to net revenues of $188.1 million reported for the first quarter last fiscal year. Net income for the first fiscal quarter was $27.8 million, or $0.09 earnings per diluted share, as compared to a net loss of $18.3 million, or a loss per share of $0.07 reported for the previous first quarter. Excluding the impact of expenses related to equity-based compensation, the company reported net income of $32.8 million and earnings per diluted share of $0.11 for the first quarter. This compares to a net loss of $14.7 million and loss per share of $0.05, excluding the impact of expenses related to equity-based compensation for the first quarter of last fiscal year.

Robert Kotick, Chairman and CEO of Activision, stated, "During the quarter, we shipped more than eight million units of new game releases worldwide and for the first six months of the calendar year, Activision was the #1 third-party U.S. publisher on the console and handheld platforms. As a result of our strong performance, we are raising our fiscal year 2008 net revenue and earnings outlook and are increasing our fiscal year operating margin outlook to a company record"

Kotick continued, "Our focus on growing our strong franchises and next- generation console leadership position is yielding superb results. We intend to continue expanding our franchise portfolio, strengthening our development capabilities and improving our operating efficiency over the balance of the fiscal year. We believe this strategy will create strengths and capabilities that should enable us to continue growing our revenues, operating margin and earnings per share, as well as increase our return on invested capital."

Business Highlights

Activision's record first quarter performance was driven by strong consumer response to its proven franchises, Guitar Hero IITM, Spider-Man 3TM and Shrek The ThirdTM, as well as its new intellectual property TRANSFORMERS: The Game, which was released in the U.S. during the quarter.

According to The NPD Group, during the quarter, Activision was the #1 U.S. publisher on both the Xbox 360TM video game and entertainment system and the PlayStation® 2 computer entertainment system. The company also ranked as the #1 third-party publisher on the PLAYSTATION® 3 computer entertainment system and the Nintendo platforms in the U.S. Activision grew its U.S. console and hand-held market share to 16.9%, as compared with 8.5% over the same period last year.

Other quarterly business highlights are as follows:

- Guitar Hero II and Spider-Man 3 were two of the top-three best-selling titles for the quarter in the U.S., according to The NPD Group. Guitar Hero II was the #1 best-selling U.S. console game overall, and Spider-Man 3 was the #3 best-selling U.S. console and handheld game.

- Shrek The Third was the #1 kid's movie-based title in the U.S. for the months of May and June combined, according to The NPD Group.

- In the U.S., Activision was the #1 third-party handheld publisher, according to The NPD Group.

- Activision's international publishing revenues grew 240% year over year.

- In Europe, Spider-Man 3 was the #1 best-selling console and handheld game for the quarter in the U.K., Germany and France, according to Charttrack and Gfk.

- On May 11, 2007, Activision completed its acquisition of DemonWare, the leading provider of network middleware technologies for console and PC games headquartered in Dublin, Ireland.

For the second quarter, Activision has already shipped TRANSFORMERS: The Game internationally in connection with the film's theatrical release and Guitar HeroTM Encore: Rocks The 80sTM for the PlayStation 2 computer entertainment system. Activision also expects to ship Enemy TerritoryTM: Quake Wars on the PC.

Company Outlook

Today, Activision increased its fiscal year 2008 net revenue and earnings per share outlook. For the full fiscal year, the company expects net revenues of $1.87 billion and earnings per diluted share of $0.51, including the impact of equity-based compensation expense, compared to the company's previous fiscal year outlook of $1.8 billion in net revenues and earnings per diluted share of $0.45. Excluding the impact of equity-based compensation expense, the company expects earnings per diluted share of $0.61.

For the second quarter, the company expects net revenues of $250 million and a loss per share of $0.04, including the impact of equity-based compensation expense. Excluding the impact of equity-based compensation expense, the company expects a loss per share of $0.03.