Activision Blizzard's Rocking Profits

Don't be fooled by the falling share price -- Activision Blizzard (NASDAQ:ATVID) blew the doors off last night's quarterly report.

The newly merged video game giant saw $0.23 of adjusted profits per share on $654 million in sales. That's year-over-year increases of around 109% and 32%, respectively. These figures are for the Activision part of the two-headed beast, as Vivendi reported the last of Blizzard's results under French rule last week, and they weren't very good because of tough comparisons to a massively successful World of Warcraft expansion released last year.

Nevertheless, it was a record performance from Activision in a traditionally weak spring quarter, when kids all over the world tend to go out and get some fresh air rather than play video games. Combined with 223 million euro in Vivendi game sales, revenue just squeaked by the $1 billion mark for the quarter, leaving Electronic Arts' (NASDAQ:ERTS) $804 million performance eating A-B's dust. Now who's the largest game publisher in the world, EA?

Activision credits the movie license for DreamWorks Animation SKG's (NYSE:DWA) Kung Fu Panda for some of its success, but the rest comes from the Guitar Hero franchise. A console game built around Aerosmith's career stood shoulder-by-shoulder with an adaptation of the guitar-playing experience to the handheld DS platform, and their impact gave Activision a tremendous boost. Upcoming major releases include Guitar Hero: World Tour, formerly known as Guitar Hero IV, which promises to kick the concept up a few notches with new features and a full band experience.

Viacom (NYSE:VIA) and EA are meeting the challenge with Rock Band 2, and the battle of the bands is on. Expect both games to do well in the marketplace, and all companies involved to profit handsomely. Yes, you can have more than one winner sometimes. 

Bertis Downs, manager of the band R.E.M., explained to me that both franchises present a great marketing opportunity for the band, as three songs from this year's Accelerate release will be downloadable on the release of GH:WT. "We are psyched the game will perhaps help us reach a different group of people," he said, "just as Rock Band helped expose R.E.M. to tons of people when Orange Crush was in that game a few months ago." No wonder, then, that many of the biggest names in music are falling all over themselves to get in on the guitar-game action. Maybe you should, too -- as an investor if not as a gamer.

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