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Activision Announces Record Third Quarter 2008 Results

Activision has announced record financial results for the third fiscal quarter ended December 31, 2007.

Net revenues for the third quarter were a record $1.48 billion, an 80% increase, as compared to net revenues of $824.3 million reported for the same quarter last fiscal year. Net income for the third fiscal quarter was $272.2 million, for $0.86 in earnings per diluted share, as compared to a net income of $142.8 million and earnings per diluted share of $0.46 reported for the third quarter of last fiscal year. Excluding the impact of expenses related to equity-based compensation, the company had adjusted net income of $284.9 million and earnings per diluted share of $0.90 for the third quarter. This compares to adjusted net income of $147.5 million and earnings per diluted share of $0.48, excluding the impact of expenses related to equity-based compensation for the third quarter of last fiscal year.

Robert Kotick, Chairman and CEO of Activision stated, "For the first time, we were the #1 U.S. console and handheld publisher for the calendar year, according to The NPD Group. With videogame software sales increasing 37% in the United States overall, the videogame market growth exceeded even our own forecasts, and we believe this momentum will continue over the coming years. Broader audiences are responding to products like Guitar Hero and we expect that the demographics for videogames will continue to expand."

Kotick continued, "We exceeded our quarterly financial goals. Our third quarter net revenues were a record $1.48 billion. We delivered 27% operating margin, which contributed to a 43% return on invested capital for the last 12 months.(1) Two of our wholly owned, internally developed franchises - Call of Duty(R) 4: Modern Warfare(TM) and Guitar Hero(R) III: Legends of Rock(TM) -- set industry records. Our solid performance during the first nine months of the fiscal year has already resulted in our 16th consecutive year of revenue growth and record operating margins. Our product and market momentum gives us confidence to once again raise our fiscal year 2008 net revenues and earnings outlook, as we continue to focus our marketing and sales efforts."

Kotick added, "We are on schedule toward obtaining the stockholder and regulatory approvals needed to complete our business combination with Vivendi Games, which will create the world's largest and most profitable independent video game company and should allow us to continue delivering exceptional returns to our shareholders. The combined company expects to have the broadest, most diverse portfolio of entertainment assets in the industry, positioning it to capitalize on the continued worldwide growth in interactive entertainment."

Business Highlights

Activision's record calendar year results were driven by strong worldwide consumer response to Call of Duty 4: Modern Warfare, Guitar Hero II(TM), Guitar Hero III: Legends of Rock, Spider-Man 3(TM), Shrek The Third(TM), as well as its new intellectual property TRANSFORMERS: The Game. In the U.S., during the calendar year, Activision was the #1 console and handheld publisher for the first time, had the top two best-selling titles overall and grew its market share to a record 17.7%, according to The NPD Group.

Other business highlights:

-- Call of Duty 4: Modern Warfare was the most popular game in units worldwide for calendar 2007, selling more than seven million copies, and the #1 PC game in units and dollars in the U.S. and Europe for the quarter ended December 31, 2007, according to The NPD Group, Charttrack and Gfk.

-- Guitar Hero(R) III: Legends of Rock was the #1 title in dollars for the calendar year worldwide, according to The NPD Group, Charttrack and Gfk. In the U.S., Guitar Hero(R) III: Legends of Rock was the #1 best-selling video game in units and dollars of all time in a single year. Additionally, the Guitar Hero(TM) franchise set an industry record surpassing $1 billion in North American retail sales in just 26 months, according to The NPD Group.

-- Spider-Man 3(TM) was the #1 movie-based video game in dollars worldwide for the calendar year, according The NPD Group, Charttrack and Gfk.

-- For the calendar year, Activision was the #1 publisher on the next-generation consoles in North America, according to The NPD Group.

-- For the quarter ended December 31, 2007, Activision was the #1 U.S. console and handheld publisher overall, according to The NPD Group.

-- For the quarter ended December 31, 2007, Activision's international publishing net revenues grew 106% over the prior year, and for the first nine months of the fiscal year were up 119% as compared to the same period for last fiscal year.

-- On December 2, 2007, Activision and Vivendi entered into a definitive agreement to combine Vivendi Games, Vivendi's interactive entertainment business -- which includes Blizzard Entertainment's(R) World of Warcraft(R), the world's #1 massively multiplayer online role playing game franchise -- with Activision, which at closing will create the world's largest pure-play online and console game publisher. On January 16, 2008, the waiting period required by the Hart-Scott-Rodino Antitrust Improvements Act expired and, on January 31, 2008, Activision filed a preliminary proxy statement relating to the transaction with the Securities Exchange Commission. The transaction remains subject to other regulatory approvals, including European antitrust clearance, approval by Activision's stockholders, and other customary closing conditions and Activision continues to target a closing date for the transaction during the first half of calendar year 2008.

Full release available here.

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