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Technology Stocks : Activision....Returns! -- Ignore unavailable to you. Want to Upgrade?

To: Tom Caruthers who wrote (1170)	5/15/1998 6:34:00 PM
From: Tom Caruthers	Read Replies (1) \| Respond to of 1992

OK...here goes...again :( Conference call generally upbeat. Plan on growing revs by 40-45% this year (around 370 million). Roughly 50:50 split between publishing and distribution. Distribution makes for more stable and predictable earnings...diversified software and some hardware sales. Roughly 50-50 internal vs external development...with emphasis on long-term top tier external developer relationships...decreases fixed development costs, expands publishing capabilities. However, difficult to make distinction since external developers utilize in-house production facilities and in house titles use outside facilities. Encourages top-notch in-house developers with entreprenurial bent to spin-off from ATVI with ATVI minority interest. ATVI will publish all of these titles. Again to reward great ATVI employees and to broaden game production. Lots of "call us later...we don't want to get into those kinds of details here". ATVI obviously gives analysts good guidance. Commented on Battlezone..."Why great press but terrible numbers?" Kotick replied "An extensive post-mortem showed a lot of mistakes...We won't let those happen again" Emphasis on TV advertising but will keep budget at the current % of sales. Will decrease print ads, and control other costs. Slate of 28 titles coming to market this year. Emphasis on playstation and PC. 10-12 titles for PSX? 2 for N64 (low development costs, high profile). Balance for PC. New titles that I picked up...Nightmare creatures II. Asteroids for PC (also PSX as announced)...can't remember now....HEY BTW... THIS IS ALL FROM MEMORY SO IF I GOT SOME OF THE NUMBERS CONFUSED... OK...what else...I had much more in my previous post, I just can't remember now. If there are product slippages, have enough in development to be able to make numbers for the year. Internal product development budget roughly flat. Employees: around 300. Predicted to stay same. Focus on reuse of technology (i.e. milk engines for all they are worth but value add onto them). Interesting tidbit....QII was 12% of sales last year. My own take: This is good news because it shows that ATVI has a well-diversified offering. OTOH (on the other hand)... since distribution makes up x% of revs last year, QII sales accounts for probably 20% of game revenues. In addition to maintaining core market of gamers....will now branch out into more mass market consumer brands with high visibility. Will target 6-10 yr olds with very high visibility titles this year to be announced. These are lower ASP, lower margins, higher volume titles than ATVI is usually accustomed to, but this seems to be where the market is shifting. Games like Deer hunter qualify. What I would have liked them to address are the following: 1) What are your plans to improve gross margins? Increase in PSX and N64 titles will allow volume to off-set lower margins, but.... 2) What is the effect going to be on going to games which require 3D hardware? As, I believe, Alex mentioned before, probably most gamers already have a 3D board. The ones who don't will likely get one on board with their next PC upgrade... ala Voodoo Rush or Intel's 740? chip. Let me post this before my computer crashes again. Tom