Activision Reports Record Q4 and Fiscal 2005 Year End Results

May 5, 2005

- Fiscal 2005 Net Revenues Increased 48% Year Over Year to $1.4 Billion - - Fiscal 2005 Net Income Grows 78% Year Over Year to $138 Million - - Performance Marks 13 Consecutive Years of Revenue Growth - - Q4 Net Revenues Up 25% Year Over Year -

SANTA MONICA, Calif., May 5, 2005 /PRNewswire-FirstCall via COMTEX/ -- Activision, Inc. (Nasdaq: ATVI) today announced record net revenues for the fourth quarter and fiscal year ended March 31, 2005.

Net revenues for the fiscal year ended March 31, 2005 were a record $1,405.9 million, or 48% higher, as compared to $947.7 million for the fiscal year ended March 31, 2004. Net income for the fiscal year was a record $138.3 million, or $0.66 per diluted share, a 78% increase over net income of $77.7 million, or $0.40 per diluted share reported for the last fiscal year.

Net revenues for the fourth quarter ended March 31, 2005 were $203.9 million, an increase of 25%, as compared to $162.9 million that the company reported for the fourth quarter of the last fiscal year. For this fiscal year's fourth quarter, the company reported net income of $3.6 million, or earnings per diluted share of $0.02, which is $0.02 higher than the company's prior guidance. Net income for the fiscal year 2004 fourth quarter was $6.7 million, or earnings per diluted share of $0.03.

Robert Kotick, Chairman and CEO of Activision, Inc. commented, "Fiscal 2005 was another record year for Activision. We delivered the highest net revenues, operating margin and earnings in the company's history. Our net revenues reached $1.4 billion, which was driven by an increase in the number of million-unit selling games year over year. We have one of the industry's strongest balance sheets with $841 million of cash and short-term investments and for the trailing 12 months our free cash flow was a record $200 million and return on invested capital was 45%. Perhaps most importantly, our gain in shareholders' equity in fiscal 2005 was $267 million. Since fiscal 2000, our shareholders' equity has increased from $132 million to $1.1 billion, a 53% rate compounded annually."

Kotick added, "We entered fiscal 2006 with the largest installed base of video gaming platforms in the industry's history and, we believe, our strongest product release slate ever. Our lineup includes new versions of our top-selling franchises -- Tony Hawk, Spider-Man, Shrek, Call of Duty, DOOM, X-Men, True Crime and Quake -- as well as, Fantastic Four, Madagascar, The Movies and an original property from the development team behind the Tony Hawk series. We have more depth in our portfolio of franchises, and with over 1,000 talented team members in our internal studios, we have one of the strongest product development operations in the industry. We remain enthusiastic about our long-term prospects and our operating margin expansion programs should enable us to continue delivering long-term value to our shareholders."

Business Highlights

Activision's fiscal year end results were driven by record worldwide sales of several titles across all platforms. As a result of these strong sales, the company's domestic publishing net revenues increased 56% and its international publishing revenues grew 72%. The company ended the fiscal year with two top-10 best-selling games across the console and handheld platforms in the U.S. -- Spider-Man 2 and Tony Hawk's Underground 2 and three top-10 best-selling PC games in the U.S. -- DOOM 3, Rome: Total War and Call of Duty, according to NPD.

During the fourth quarter, the company released Spider-Man 2 and Tony Hawk's Underground 2 Remix for the PSP simultaneously with the North American release of the new handheld platform, as well as three titles from LucasArts that were released in Europe -- Star Wars® Knights of the Old Republic® II: The Sith Lords, Mercenaries and Star Wars Republic Commando.

Other business highlights are as follows:

     *  Spider-Man 2 for the Nintendo(R) DS topped the charts as the #1
        best-selling third-party title for the platform during the holiday
        period in the U.S., and the #3 best-selling third-party title in the
        U.K., according to NPD Funworld and Chart Track.

     *  During the quarter, Tony Hawk's Underground 2 Remix, ranked as the
        #3 best-selling third-party title for the new PSP platform, according
        to NPD Funworld.

     *  During the fiscal year, we grew our publishing revenues from the
        handheld platform by 456% or $114 million.

     *  During the fiscal year, Activision's Call of Duty franchise
        established itself as the best-selling console game franchise based on
        a new intellectual property.

     *  For calendar 2004, Spider-Man 2 was the #1 best-selling movie-based
        game in the U.S. and Shrek 2 was the #1 best-selling children's video
        game in the U.S., according to NPD Funworld.

     *  On January 20, 2005, Activision announced that the company further
        strengthened its next-generation development capabilities through the
        acquisition of game developer Vicarious Visions, the creative studio
        behind the #1 best-selling third-party Nintendo DS title, Spider-Man
        2.

     *  On May 3, 2005, Activision announced that the company acquired game
        developer Toys For Bob.  As a result of the acquisition, Activision
        now has approximately 1,000 employees in its studio operations.

During the fourth quarter, the Board of Directors approved a four-for- three split of its outstanding common shares. The split was approved on February 23, 2005 and was paid on March 22, 2005 to shareholders of record as of the close of business on March 7, 2005.

We have already seen a strong start to the first quarter of fiscal year 2006 with the releases of DOOM 3 for the Xbox and the DOOM 3: Resurrection of Evil expansion pack for the PC. The remainder of our first quarter slate is being driven by games based on two highly anticipated summer movie releases, "Madagascar" and "Fantastic Four."

Company Outlook

Activision reaffirmed its net revenues and earnings per diluted share outlook for fiscal 2006 of $1.43 billion in net revenues and earnings per diluted share of $0.68. For the first quarter of the fiscal year 2006, the company expects net revenues of $200 million and a loss per share of $0.03.

Non-GAAP Financial Measures

The company's press release includes the non-GAAP financial measures of "free cash flow" and "return on invested capital." A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measure appears at the end of this press release.

Conference Call

Today at 4:30 p.m. EDT, Activision's management will host a conference call and Webcast to discuss its fiscal 2005 year-end results and outlook for fiscal 2006. The company welcomes all members of the financial and media communities to visit the "Investor Relations" area of www.activision.com to listen to the conference call via a live Webcast or to listen to the call live by dialing into (719) 457-2657 in the U.S.

About Activision

Headquartered in Santa Monica, California, Activision, Inc. is a leading worldwide developer, publisher and distributor of interactive entertainment and leisure products. Founded in 1979, Activision posted net revenues of $1.4 billion for the fiscal year ended March 31, 2005.

Activision maintains operations in the U.S., Canada, the United Kingdom, France, Germany, Italy, Japan, Australia, Scandinavia and the Netherlands. More information about Activision and its products can be found on the company's World Wide Web site, which is located at www.activision.com.

Note: The statements made in this press release that are not historical facts are "forward-looking" statements. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties. The company cautions readers of this press release that a number of important factors could cause Activision's actual future results to differ materially from those expressed in any such forward-looking statements.

Such factors include, without limitation, product delays, retail acceptance of our products, industry competition, rapid changes in technology and industry standards, protection of proprietary rights, maintenance of relationships with key personnel, vendors and third-party developers, international economic and political conditions, integration of recently acquired subsidiaries and identification of suitable future acquisition opportunities.

These important factors and other factors that potentially could affect the company's financial results are described in our filings with the Securities and Exchange Commission, including the company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers of this press release are referred to such filings. The company may change its intention, belief or expectation, at any time and without notice, based upon any changes in such factors, in the company's assumptions or otherwise. The company undertakes no obligation to release publicly any revisions to its forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

ACTIVISION, INC. AND SUBSIDIARIES
     CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
     (In thousands, except earnings per share data)

                               Quarter ended March 31, Year ended March 31,
                                   2005      2004        2005       2004
                                           Restated               Restated

    Net revenues                $203,861  $162,897  $1,405,857   $947,656
    Costs and expenses:
      Cost of sales -
       product costs             130,190    91,239     658,949    475,541
      Cost of sales -
       software royalties
       and amortization            6,954     9,169     123,800     59,744
      Cost of sales -
       intellectual property
       licenses                    4,400     4,854      62,197     31,862
      Product development         20,489    18,031      86,543     97,859
      Sales and marketing         29,842    26,196     230,058    128,221
      General and
       administrative             14,885     8,765      59,739     44,612
        Total operating
         expenses                206,760   158,254   1,221,286    837,839
    Operating income (loss)       (2,899)    4,643     184,571    109,817
    Investment income, net         5,138     2,050      13,092      6,175
    Income before provision
     (benefit) for income taxes    2,239     6,693     197,663    115,992
    Provision (benefit)
     for income taxes             (1,334)       29      59,328     38,277
    Net income                    $3,573    $6,664    $138,335    $77,715

    Basic earnings per share       $0.02     $0.04       $0.74      $0.44
    Weighted average common
     shares outstanding          195,413   180,735     187,517    177,665

    Diluted earnings per share     $0.02     $0.03       $0.66      $0.40
    Weighted average common
     shares outstanding
     assuming dilution           215,614   200,307     209,145    193,191

     Share and earnings per share data have been restated to reflect our
     four-for-three stock split for shareholders of record as of March 7,
     2005, paid March 22, 2005.



     ACTIVISION, INC. AND SUBSIDIARIES
     CONDENSED CONSOLIDATED BALANCE SHEETS
     (In thousands)
                                                    March 31,      March 31,
                                                      2005           2004
    ASSETS
      Current assets:
        Cash, cash equivalents and short-term
         investments                                $840,864       $587,649
        Accounts receivable, net                     109,144         62,577
        Inventories                                   48,018         26,427
        Software development                          73,096         58,320
        Intellectual property licenses                21,572         32,115
        Deferred income taxes                          6,760         26,127
        Other current assets                          23,010         18,660
          Total current assets                     1,122,464        811,875
      Software development                            18,518         28,386
      Intellectual property licenses                  14,154         16,380
      Property and equipment, net                     30,490         25,539
      Deferred income taxes                           28,041          9,064
      Other assets                                     1,635          1,080
      Goodwill                                        91,661         76,493
          Total assets                            $1,306,963       $968,817

    LIABILITIES AND SHAREHOLDERS' EQUITY
      Current liabilities:
        Accounts payable                            $108,984        $72,874
        Accrued expenses                              98,067         63,205
          Total liabilities                          207,051        136,079
      Shareholders' equity:
        Common stock                                      --             --
        Additional paid-in capital                   741,680        758,626
        Retained earnings                            346,614        208,279
        Treasury stock                                    --       (144,128)
        Accumulated other comprehensive income        11,618          9,961
          Total shareholders' equity               1,099,912        832,738
            Total liabilities and shareholders'
             equity                               $1,306,963       $968,817



     ACTIVISION, INC. AND SUBSIDIARIES
     FINANCIAL INFORMATION
     For the Quarter and Year Ended March 31, 2005 and 2004
     (Amounts in thousands)
                                                                   Percent
                                                                   Increase
                                       Quarter Ended              (Decrease)
                           March 31, 2005       March 31, 2004
                        Amount   % of Total   Amount  % of Total

    Geographic
     Revenue Mix
      United States     $69,087      34%      $65,509      40%         5%
      International     134,774      66%       97,388      60%        38%
      Total net
       revenues        $203,861     100%     $162,897     100%        25%

    Activity/Platform
     Mix
    Publishing:
      Console           $66,878      33%      $68,919      42%        -3%
      Hand-held          33,353      16%        2,795       2%      1093%
      PC                 30,398      15%       24,896      15%        22%
      Total
       publishing      $130,629      64%      $96,610      59%        35%

    Distribution:
      Console           $52,826      26%      $52,293      32%         1%
      Hand-held           8,148       4%        3,802       3%       114%
      PC                 12,258       6%       10,192       6%        20%
      Total
       distribution     $73,232      36%      $66,287      41%        10%
      Total net
       revenues        $203,861     100%     $162,897     100%        25%



                                                                    Percent
                                                                   Increase
                                        Year Ended                (Decrease)
                           March 31, 2005       March 31, 2004
                        Amount   % of Total   Amount  % of Total

    Geographic
     Revenue Mix
      United States    $696,325      50%     $446,812      47%        56%
      International     709,532      50%      500,844      53%        42%
      Total net
       revenues      $1,405,857     100%     $947,656     100%        48%

    Activity/Platform
     Mix
    Publishing:
      Console          $713,947      51%     $508,418      54%        40%
      Hand-held         138,695      10%       24,945       2%       456%
      PC                220,087      15%      132,369      14%        66%
      Total
       publishing    $1,072,729      76%     $665,732      70%        61%

    Distribution:
      Console          $256,452      18%     $223,802      24%        15%
      Hand-held          23,282       2%       18,361       2%        27%
      PC                 53,394       4%       39,761       4%        34%
      Total
       distribution    $333,128      24%     $281,924      30%        18%
      Total net
       revenues      $1,405,857     100%     $947,656     100%        48%



     ACTIVISION, INC. AND SUBSIDIARIES
     FINANCIAL INFORMATION
     For the Quarter and Year Ended March 31, 2005 and 2004

                        Quarter Ended  Quarter Ended  Year Ended  Year Ended
                          March 31,      March 31,    March 31,   March 31,
                            2005           2004         2005        2004
    Publishing Net
     Revenues

      PC                       23%          26%          21%          20%

      Console                  51%          71%          66%          76%
        PlayStation 2          25%          41%          39%          43%
        Microsoft Xbox         22%          23%          18%          22%
        Nintendo GameCube       3%           4%           9%           8%
        PlayStation             1%           3%           0%           3%

      Hand-held                26%           3%          13%           4%
        Game Boy Advance        7%           3%           9%           4%
        Nintendo Dual Screen    4%           0%           2%           0%
        PlayStation Portable   15%           0%           2%           0%

      Total publishing net
       revenues               100%         100%         100%         100%



    ACTIVISION, INC. AND SUBSIDIARIES
     Non-GAAP Disclosures
     Free Cash Flow
     (In thousands)
                            Three     Three    Three     Three     Three
                            Months    Months   Months    Months    Months
                            Ended     Ended    Ended     Ended     Ended
                         03/31/2005 12/31/04  9/30/04   6/30/04   3/31/04

    Net Cash
     Provided by
     (Used In)
     Operating
     Activities            $118,931  $85,668   $62,846   $(52,136) $21,069

    Less: Capital
     Expenditures           $(6,911) $(3,587)  $(2,562)   $(1,881) $(2,521)

    Free Cash Flow         $112,020  $82,081   $60,284   $(54,017) $18,548
    Trailing Twelve
     Month Free
     Cash Flow             $200,368 $106,896  $121,998    $30,779  $55,427



     ACTIVISION, INC. AND SUBSIDIARIES
     Non-GAAP Disclosures
     Return on Invested Capital
     (In thousands)

                            Three     Three    Three     Three     Three
                            Months    Months   Months    Months    Months
                            Ended     Ended    Ended     Ended     Ended
                         03/31/2005 12/31/04  9/30/04   6/30/04   3/31/04
    NET OPERATING PROFIT
     AFTER TAXES

    Net income               $3,573  $97,262   $25,543    $11,957   $6,664
    Less:
    Investment income        (5,138)  (3,197)   (2,645)    (2,112)  (2,051)
    Tax effect on
     Investment income (B)    1,394      991       846        697      677
    Net Operating Profit
     After Taxes              $(171) $95,056   $23,744    $10,542   $5,290
    Trailing Twelve
     Month Net
     Operating Profit
     After Taxes           $129,171 $134,632  $115,576    $80,826  $73,630

    INVESTED CAPITAL

    Total assets        $1,306,963 $1,344,629 $1,104,169 $985,841 $968,817
    Less:
    Cash and short
     term investments       840,864  713,180   606,087    539,146  587,649
    Current liabilities
     (non-interest
     bearing)               207,051  311,433   216,342    132,092  136,079
    Invested capital       $259,048 $320,016  $281,740   $314,603 $245,089
    Trailing Twelve
     Month Invested
     capital (A)            284,100  282,288   268,816    260,784  236,584
    Return on Invested
     Capital (C)                 0%      30%        8%         3%        2%
    Trailing Twelve
     Month Return on
     Invested Capital (C)       45%      48%       43%        31%       31%

     (A)  Amounts for the trailing twelve months represent averages of the
          previous four fiscal quarters
     (B)  Tax effect represents investment income multiplied by our effective
          tax rate.
     (C)  Return on Invested Capital and Trailing Twelve Month Return on
          Invested Capital is the percentage of Net Operating Profit After
          Taxes to Invested Capital, and the percentage of Trailing Twelve
          Month Net Operating Profit After Taxes to Trailing Twelve Month
          Invested Capital, respectively

SOURCE Activision, Inc.

Bill Chardavoyne, Chief Financial Officer, +1-310-255-2229,
bchardavoyne@activision.com, or Kristin Mulvihill Southey, Vice President, Investor
Relations, +1-310-255-2635, ksouthey@activision.com, or Maryanne Lataif, Vice
President, Corporate Communications, +1-310-255-2704, mlataif@activision.com, all of
Activision, Inc.
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