Activision Reports Record Fiscal 2003 Year End Results

May 8, 2003

Net Revenue and Earnings Per Share Highest in Company's History
Net Income Increases 27% Year Over Year

SANTA MONICA, Calif., May 8 /PRNewswire-FirstCall/ -- Activision, Inc. (Nasdaq: ATVI) today announced financial results for the fourth quarter and fiscal year ended March 31, 2003.

Net revenues for the fiscal year ended March 31, 2003 were $864.1 million or 10% higher, as compared to $786.4 million for the fiscal year ended March 31, 2002. Net income for the fiscal year was $66.2 million, or a record $0.96 per diluted share, compared with net income of $52.2 million, or $0.88 per diluted share reported for the last fiscal year.

Net revenues for the fourth quarter ended March 31, 2003 were $125.0 million as compared to $164.9 million that the company reported for the fourth quarter of the last fiscal year. For this fiscal year's fourth quarter, the company reported a net loss of $8.0 million or a loss per share of $0.13, as compared to net income of $10.9 million or $0.17 per diluted share, for last fiscal year's fourth quarter.

Activision increased its outlook for the first quarter of fiscal 2004 to $140 million in revenues and a loss per share of $0.01. The company also provided an outlook for the second quarter of $130 million in revenue and earnings per diluted share of $0.05. The company's full year outlook remains unchanged at $750 million in revenue and $0.70 earnings per diluted share.

Robert Kotick, Chairman and CEO of Activision, Inc. commented, "Fiscal 2003 was another record year for Activision. Not only did we deliver the highest net revenues and earnings in the company's history, we also significantly strengthened our business, balance sheet and overall financial position. We grew net income by 27%, and finished the year with more than $400 million of cash and short-term investments, lower inventories and all time low DSOs. We have one of the strongest balance sheets in the industry which gives us a clear competitive advantage as we enter the new fiscal year."

"We will enter fiscal 2004 with the largest installed base of video gaming platforms in the industry's history. We have a balanced portfolio of both licensed and original properties including id Software's Doom III and Return to Castle Wolfenstein, a new game based on Tony Hawk, Soldier of Fortune 2: Double Helix and Tenchu: Wrath of Heaven, X2 Wolverine's Revenge, Disney's Extreme Skate Adventure, as well as True Crime: Streets of L.A., Call of Duty and Pitfall Harry. As the installed base for the new console systems continues to grow, we believe that our diversified product slate, strong brand franchises and top developer partnerships will position us well for both near- and long-term opportunities."

Business Highlights

Activision's fiscal year end results were driven by solid performance of its titles across all platforms. The company continued its market leadership position in both the action sports and super heroes genres with Spider-Man and Tony Hawk's Pro Skater both ending the calendar year as top five franchises in North America for the console and hand-held platforms. Additionally, Soldier of Fortune 2: Double Helix, Street Hoops, Medieval Total War and Tenchu: Wrath of Heaven performed well worldwide.

During the fourth quarter, the company's Tenchu: Wrath of Heaven was the #1 PlayStation 2 game in the U.S. for the month of March and topped sell-through retail charts in the U.K., Germany and several regions in the Asia Pacific territory.

Other highlights from the fiscal year are as follows:
     *  Activision significantly strengthened its intellectual property
        portfolio through five multi-year partnership agreements:

        *  The company entered into a strategic multi-year, multi-property
           publishing agreement that grants Activision the exclusive
           interactive rights to publish games based on DreamWorks' three
           upcoming computer-animated feature films: "Sharkslayer,"
           "Madagascar," and "Over the Hedge."

        *  The company was named master videogame licensee for Lemony
           Snicket's A Series of Unfortunate Events, the best-selling
           children's book series that is in development for a feature film by
           Paramount Pictures and Nickelodeon Movies.

        *  The company entered into an exclusive agreement with legendary
           U.K.-based game designer Peter Molyneux.  Under the terms of the
           agreement, the company has secured the exclusive worldwide rights
           to Molyneux's new project tentatively titled The Movies for the PC
           and all video game console platforms.

        *  The company entered into an exclusive agreement with Valve L.L.C.
           that grants Activision exclusive worldwide publishing rights to
           upcoming games created by the premiere PC game developer.

        *  The company expanded its long-term, broad-based strategic alliance
           with Marvel Enterprises and signed a multi-year extension for their
           current video game licensing agreements.  The expanded agreements
           grant Activision the exclusive rights to develop and publish
           video game products based on Marvel's comic book franchises
           Spider-Man(TM), X-MEN(TM), Fantastic Four(TM) and Iron Man(TM)
           through 2009.

     *  Activision acquired two development studios -- Luxoflux and Z-Axis --
        each of which has developed a title that has shipped more than one
        million units.  Additionally, the company purchased an equity interest
        in Infinity Ward, a newly formed studio comprised of 22 of the members
        who developed the hit title Medal of Honor for the PC.


Under Activision's authorized share buyback program, during the fiscal year 2003, the company purchased 7.2 million shares of common stock at an average cost of $14.08 per share. During the fourth quarter ended March 31, 2003, the company purchased 5.4 million shares at an average cost of $14.40 per share. Additionally, under the authorized share buyback program the company entered into a series of structured stock repurchase transactions, in the aggregate amount of approximately $110 million, of which $85 million was entered into during the fourth quarter.

On May 5, 2003, the company announced that its Board of Directors has approved a three-for-two split of its outstanding common shares. The split is payable on June 6, 2003, to shareholders of record as of May 16, 2003. The stock split will be accomplished through a 50% stock dividend, providing shareholders with one additional share of common stock for every two shares they hold.

Looking ahead to the first quarter of fiscal year 2004, our slate is being driven by X2 Wolverine's Revenge, which shipped simultaneously on five platforms in advance of Twentieth Century Fox's movie release, id Software's Return to Castle Wolfenstein and Wakeboarding Unleashed featuring Shaun Murray for the Xbox and PlayStation 2 computer entertainment system, Soldier of Fortune II: Double Helix for the Xbox, Lost Kingdoms a real-time action RPG for the Nintendo GameCube and Day of Defeat, Medieval Total War: Viking Invasion and Star Trek®: Elite Force 2 for the PC.

Today at 4:30 p.m. EDT, Activision's management will host a conference call and Webcast to discuss its fiscal 2003 year-end results and outlook. The company welcomes all members of the financial and media communities to visit the "Investor Relations" area of http://www.activision.com to listen to the conference call via live Webcast or to listen to the call live by dialing into (952) 556-2802.

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 $864 million for the fiscal year ended March 31, 2003.

Activision maintains operations in the U.S., Canada, the United Kingdom, France, Germany, 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 http://www.activision.com .

Note: The statements made in this press release that are not historical facts are forward-looking statements. Although the company believes that its plans, intentions and expectations reflected in such forward-looking statements are reasonable, a number of important factors could cause our 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.





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

                                         Quarter ended       Year ended
                                           March 31,          March 31,
                                        2003      2002      2003      2002

    Net revenues                      $125,001  $164,912  $864,116  $786,434
    Costs and expenses:
       Cost of sales - product costs    71,973    87,886   440,977   435,725
       Cost of sales - software
        royalties and amortization      12,647    11,192    79,194    58,892
       Cost of sales - intellectual
        property licenses               11,449     6,569    45,002    40,114
       Product development              18,203    11,900    56,971    40,960
       Sales and marketing              16,002    19,096   100,646    86,161
       General and administrative        9,171    11,407    46,479    44,008
            Total operating expenses   139,445   148,050   769,269   705,860
    Operating income (loss)            (14,444)   16,862    94,847    80,574
    Investment income, net               2,006       622     8,560     2,546
    Income (loss) before provision
     (benefit) for income taxes        (12,438)   17,484   103,407    83,120
    Provision (benefit) for income
     taxes                              (4,481)    6,600    37,227    30,882
    Net income (loss)                  $(7,957)  $10,884   $66,180   $52,238


    Basic earnings (loss) per share     $(0.13)    $0.20     $1.03     $1.03
    Weighted average common shares
     outstanding                        62,939    54,921    64,159    50,651


    Diluted earnings (loss) per share   $(0.13)    $0.17     $0.96     $0.88
    Weighted average common shares
     outstanding assuming dilution      62,939    62,599    69,103    59,455



     ACTIVISION, INC. AND SUBSIDIARIES
     CONDENSED CONSOLIDATED BALANCE SHEETS
     (In thousands)
                                                 March 31,         March 31,
                                                    2003               2002
    ASSETS
        Current assets:
           Cash, cash equivalents and
            short-term investments                $406,954           $279,007
           Accounts receivable, net                 15,822             76,733
           Inventories                              19,577             20,736
           Software development                     26,791             36,263
           Intellectual property licenses            8,906              6,326
           Deferred income taxes                    38,290             22,608
           Other current assets                     10,565             15,200
                Total current assets               526,905            456,873
        Software development                        35,281              3,254
        Intellectual property licenses              36,943             10,899
        Property and equipment, net                 22,265             17,832
        Deferred income taxes                       10,322             28,795
        Other assets                                 5,081              3,242
        Goodwill                                    68,019             35,992
                 Total assets                     $704,816           $556,887

    LIABILITIES AND SHAREHOLDERS' EQUITY
        Current liabilities:
           Current portion of long-term debt          $147               $168
           Accounts payable                         45,602             64,410
           Accrued expenses                         58,656             59,096
                 Total current liabilities         104,405            123,674
        Long-term debt, less current portion         2,671              3,122
                 Total liabilities                 107,076            126,796
        Shareholders' equity:
           Common stock                                -                  -
           Additional paid-in capital              592,295            397,528
           Retained earnings                       130,564             64,384
           Treasury stock                         (121,685)           (20,323)
           Accumulated other
            comprehensive loss                      (3,434)           (11,498)
                 Total shareholders' equity        597,740            430,091
                     Total liabilities and
                      shareholders' equity        $704,816           $556,887



     ACTIVISION, INC. AND SUBSIDIARIES
     FINANCIAL INFORMATION
     For the Quarter and Year Ended March 31, 2003 and 2002
     (Amounts in thousands)

                                                                     Percent
                                                                     Increase
                                                                    (Decrease)
                                           Quarter Ended
                                 March 31, 2003       March 31, 2002
                              Amount   % of Total   Amount   % of Total
    Geographic Revenue Mix
       United States           $52,217      42%     $72,464     44%      -28%
       International            72,784      58%      92,448     56%      -21%
       Total net revenues     $125,001     100%    $164,912    100%      -24%


    Activity/Platform Mix
    Publishing:
       Console                 $56,197      71%     $57,805     53%       -3%
       Hand-held                 4,905       6%      17,699     17%      -72%
       PC                       17,901      23%      32,809     30%      -45%
       Total publishing        $79,003      63%    $108,313     66%      -27%

    Distribution:
       Console                 $36,264      79%     $46,149     82%      -21%
       Hand-held                 2,305       5%       3,787      6%      -39%
       PC                        7,429      16%       6,663     12%       11%
       Total distribution      $45,998      37%     $56,599     34%      -19%
       Total net revenues     $125,001     100%    $164,912    100%      -24%



                                                                     Percent
                                                                     Increase
                                                                    (Decrease)
                                             Year Ended
                                 March 31, 2003       March 31, 2002
                              Amount   % of Total   Amount   % of Total
    Geographic Revenue Mix
       United States          $432,261      50%    $404,905     51%        7%
       International           431,855      50%     381,529     49%       13%
       Total net revenues     $864,116     100%    $786,434    100%       10%


    Activity/Platform Mix
    Publishing:
       Console                $466,116      76%    $312,986     57%       49%
       Hand-held                49,966       8%     119,177     22%      -58%
       PC                       99,893      16%     117,345     21%      -15%
       Total publishing       $615,975      71%    $549,508     70%       12%

    Distribution:
       Console                $208,505      84%    $167,709     71%       24%
       Hand-held                14,103       6%      39,865     17%      -65%
       PC                       25,533      10%      29,352     12%      -13%
       Total distribution     $248,141      29%    $236,926     30%        5%
       Total net revenues     $864,116     100%    $786,434    100%       10%



    ACTIVISION, INC. AND SUBSIDIARIES
    FINANCIAL INFORMATION
    For the Quarter and Year Ended March 31, 2003 and 2002

                       Quarter Ended   Quarter Ended   Year Ended   Year Ended
                          March 31,       March 31,     March 31,    March 31,
                            2003            2002          2003         2002

    Publishing Net Revenues

       PC                      23%           30%           16%            21%

       Console                 71%           53%           76%            57%
           PlayStation  2      45%           14%           42%            20%
           PlayStation         11%           14%            9%            21%
           Microsoft Xbox      10%           21%           12%             6%
           Nintendo GameCube    5%            1%           12%             3%
           Nintendo 64          0%            2%            1%             6%
           Sega Dreamcast       0%            1%            0%             1%

       Hand-held                6%           17%            8%            22%
           Game Boy Advance     6%           14%            7%            15%
           Game Boy Color       0%            3%            1%             7%

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


SOURCE Activision, Inc.