FISCAL 2000 SECOND QUARTER FINANCIAL RESULTS

Oct 20, 1999

ACTIVISION REPORTS RECORD SECOND QUARTER REVENUES

Net Revenues Increase 74%
Earnings Per Share Up $.14

SANTA MONICA, Calif., Oct. 20 /PRNewswire/ -- Activision, Inc. (Nasdaq: ATVI) today announced financial results for the second fiscal quarter ended September 30, 1999.

Net revenues for the second fiscal quarter increased 74% to $115.4 million from $66.2 million for the second quarter of the last fiscal year. Net income for the second fiscal quarter was $1.1 million, or $0.04 per share, compared with a net loss of $2.2 million, or $0.10 per share, for the same period last year.

The increase in net revenues for the second fiscal quarter was driven by strong growth in the Company's publishing operations, with the release of Tony Hawk's Pro Skater, QUAKE II, Space Invaders and Intellivision Classics for the PlayStation game console, Cabela's Big Game Hunter III and Space Invaders for the PC, Blue Stinger for the Dreamcast and Asteroids for the Nintendo Gameboy Color.

"We are pleased with the customer response to our slate of recently released games," stated Robert A. Kotick, Chairman and CEO, Activision, Inc. "All of these titles had solid launches in the market and we expect them to continue selling well into the holiday season. These releases, coupled with our expected third fiscal quarter titles, including Toy Story 2, QUAKE III Arena, Vigilante 8: 2nd Offense, Wu Tang: Shaolin Style, Star Trek: Hidden Evil, Battlezone II, Interstate '82, Shanghai: Second Dynasty and Teen Digital Diva II: Cosmic Guide & Journal, will allow us to capitalize on what we believe will be the best-selling holiday season in the history of our industry."

Kotick continued, "During the quarter we significantly expanded our publishing operations and continued to achieve many of our strategic objectives. Our recent acquisition of Neversoft Entertainment reinforced our status as a major console developer and should allow us to take full advantage of the next-generation of console game systems. We also entered into relationships with two of the industry's most talented game developers -- Peter Molyneux, the founder of Bullfrog Productions, one of the most important developers in the world, and Larry Holland's Totally Games, which created the Star Wars based titles X-Wing vs. TIE Fighter and X-Wing Alliance for LucasArts. Additionally, we expanded our relationship with Marvel Enterprises with respect to Marvel's X-MEN and Blade franchises."

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 revenues of $436 million for the fiscal year ended March 31, 1999.

Activision maintains operations in the US, Canada, the United Kingdom, France, Germany, Japan, Australia, The Netherlands and Belgium. 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: Any reference to the development of products, growth rates, investment or other performance or the continued success of the company's current product offerings constitutes forward-looking information and actual future results may vary materially. There can be no assurance of the rate of growth of the industry or of the company, that the company's products will enjoy continued success or that any products in development will ever be commercially released or that, if released, such products will contribute revenues to the company sufficient to recoup or exceed their development cost. For a discussion of these and other factors that could affect Activision's business and financial results, see information contained in the company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q on file at the Securities and Exchange Commission.




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

                                  (Unaudited)(Unaudited)(Unaudited)(Unaudited)
                                         Quarter ended      Six month ended
                                        September 30,         September 30,
                                     1999          1998      1999      1998
                                               Restated            Restated

    Net revenues                      $115,363 $66,182  $ 199,505  $127,723
    Costs and expenses:                                                  --
      Cost of sales -
       product costs                 66,284      43,473   119,823    82,864
      Cost of sales - royalties
       and software amortization     11,610       4,999    21,480     7,749
      Product development            5,819        4,246    10,342    10,307
      Sales and marketing            20,020      10,798    37,158    24,537
      General and administrative     6,593        4,580    11,296     9,130
      Amortization of intangible
       assets                        1,362          396     1,831       793
      Merger expenses                150            425       150       600
        Total operating expenses     111,838     68,917   202,080   135,980
    Operating income (loss)          3,525      (2,735)   (2,575)   (8,257)
    Interest expense, net            (1,838)      (824)   (2,997)   (1,225)
    Income (loss) before
     provision for
      income taxes                   1,687      (3,559)   (5,572)   (9,482)
    Provision for income taxes       624        (1,354)   (2,061)   (3,606)
    Net income (loss)                $1,063    $(2,205)  $(3,511)  $(5,876)

    Basic earnings per share         $0.04      $(0.10)   $(0.15)   $(0.26)
    Diluted earnings per share       $0.04      $(0.10)   $(0.15)   $(0.26)
    Common shares outstanding        24,502      22,669    24,103    22,648
    Common shares assuming
     dilution                        26,753      22,669    24,103    22,648


    ACTIVISION, INC.
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (In thousands)
                                             (Unaudited)         (Unaudited)
                                             September 30,        March 31,
                                                 1999               1999
    ASSETS                                                        Restated
      Current assets:
       Cash and cash equivalents                $25,797            $33,037
       Accounts receivable, net                 127,637            117,541
       Inventories, net                          40,805             30,931
       Prepaid royalties and
        capitalized software costs               45,458             30,593
       Distribution rights advances               2,535              7,500
        Deferred income taxes                    11,145              6,383
       Other current assets                      14,831              9,965
           Total current assets                 268,208            235,950
       Prepaid royalties and
        capitalized software costs               10,377              6,923
       Property and equipment, net               11,438             10,924
       Excess purchase price
        over identifiable
         assets acquired, net                    53,727             21,647
       Deferred income taxes                      2,618              2,618
       Other assets                               8,795              5,283
        Total assets                           $355,163          $ 283,345

    LIABILITIES AND STOCKHOLDERS' EQUITY
       Current liabilities:
         Notes payable to bank                  $25,339             $5,992
         Accounts payable                        39,731             43,853
         Accrued expenses                        61,194             45,160
           Total current liabilities            126,264             95,005
    Note payable to bank                         19,291              1,143
    Convertible subordinated notes               60,000             60,000
    Other liabilities                                 2                  6
         Total liabilities                      205,557            156,154

    Commitments and contingencies
    Stockholders' equity:
       Common stock                                  --                 --
       Additional paid-in capital               134,412            109,251
       Retained earnings                         22,217             25,728
       Cumulative foreign currency
        translation                             (1,745)            (2,510)
       Less: Treasury stock                     (5,278)            (5,278)
         Total stockholders' equity             149,606            127,191
           Total liabilities and
            stockholders' equity               $355,163          $ 283,345


    ACTIVISION, INC.
    FINANCIAL INFORMATION
    For the Quarters and Six Months Ended September 30, 1999 and 1998
    (Amounts in thousands)
    (Unaudited)

                                                                     Percent
                                                                    Increase
                                        Quarter Ended              (Decrease)
                            September 30, 1999      September 30, 1998
                            Amount  % of Total   Amount  % of Total

    Geographic Revenue Mix
      United States         $58,345     51%     $21,242       32%      175%
      International          57,018     49%      44,940       68%       27%
      Total net revenues   $115,363    100%     $66,182      100%       74%

    Activity/Platform Mix
    Publishing:
      Console               $61,890     71%     $12,813       53%      383%
      PC                     25,216     29%      11,317       47%      123%
      Total Publishing      $87,106     76%     $24,130       36%      261%

    Distribution:
      Console               $17,933     63%    $ 31,718       75%      -43%
      PC                     10,324     37%      10,334       25%        0%
      Total Distribution    $28,257     24%     $42,052       64%      -33%
      Total net revenues   $115,363    100%     $66,182      100%       74%

    Channel Revenue Mix
      Retailer/Reseller    $108,322     94%     $63,487       96%       71%
      OEM, Licensing &
       Other                  7,041      6%       2,695        4%      161%
      Total net revenues   $115,363    100%     $66,182      100%       74%

                                                                     Percent
                                                                    Increase
                                       Six Months Ended            (Decrease)
                            September 30, 1999   September 30, 1998
                            Amount  % of Total   Amount  % of Total

    Geographic Revenue Mix
      United States         $93,158     47%     $37,161       29%      151%
      International         106,347     53%      90,562       71%       17%
      Total net revenues   $199,505    100%    $127,723      100%       56%

    Activity/Platform Mix
    Publishing:
      Console               $93,405     66%     $23,782       50%      293%
      PC                     47,067     34%      23,510       50%      100%
      Total Publishing      140,472     70%      47,292       37%      197%

    Distribution:
      Console                35,646     60%      59,174       74%      -40%
      PC                     23,387     40%      21,257       26%       10%
      Total Distribution     59,033     30%      80,431       63%      -27%
      Total net revenues   $199,505    100%    $127,723      100%       56%

    Channel Revenue Mix
      Retailer/Reseller    $187,680     94%    $120,634       94%       56%
      OEM, Licensing &
       Other                 11,825      6%       7,089        6%       67%
      Total net revenues   $199,505    100%    $127,723      100%       56%



SOURCE Activision, Inc.