"Guitar Hero" makes Activision into profit hero

By Scott Hillis

SAN FRANCISCO (Reuters) - Activision Inc ATVI.O on Thursday posted a higher-than-expected quarterly profit and gave a bullish revenue forecast, citing strong sales of its hit "Call of Duty 4" and "Guitar Hero 3" video games.

Activision, which is awaiting approval of its merger with the games unit of French telecoms and media giant Vivendi (VIV.PA: Quote, Profile, Research, Stock Buzz), said a more aggressive roll-out of "Guitar Hero 3" in Europe this year will help sustain growth.

Activision expects revenue in its current, fourth fiscal quarter to be $350 million, about 25 percent higher than the average forecast of Wall Street analysts on Reuters Estimates.

"What's yet to be demonstrated is whether demand for 'Guitar Hero' will be as robust throughout Europe as a whole as it has in the North American market," said Ed Williams, an analyst with BMO Capital Markets.

"Guitar Hero 3", in which players strum guitar-shaped controllers in time with rock songs playing on-screen, was one of the best-selling games last year but had a muted European launch as Activision focused on satisfying U.S. demand.

The company is also banking on games tied to upcoming films such as "Kung Fu Panda" from DreamWorks (DWA.N: Quote, Profile, Research, Stock Buzz) and a new James Bond title from Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz).

"All those products will be important this year but 'Guitar Hero 3' will probably be the most important," Activision Chief Executive Bobby Kotick told Reuters in an interview.

"We are making progress (in Europe) on the inventory front, on getting local content. We are definitely a year behind in Europe versus what we did in North America."