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Tickers in this Article: ATVI, ERTS, GME, THQI, TTWO, SNE, MSFT, OPY, AGE, NTDOY
Usually, being delinquent in SEC filings and facing delisting would keep a stock down. But, this doesn't appear to be the case with video game publisher Activision. It recently hit a 52-week high of $19.20, up from a one-year low of $10.47.

Troubles with the Government
Activision
(Nasdaq: ATVI) was one of the companies involved in back-dating options, a practice which allows management to receive a lower strike price and better profit on their option grants. The company cleared its CEO (Robert Kotick) and Co-Chairman (Brian Kelly) of any wrong doing, but the former heads of human resources, legal, and finance were accused of changing options dates (To learn more about options backdating, please see What is options backdating? and The Dangers of Options Backdating).

The period covered in the board's back-dating investigation ran from 1994 to 2006. The company still has not determined what the tax and P&L consequences will be. That still leaves the company unable to report full financial results and leaves it in violation of the NASDAQ rules for timely filing. This, in turn, means that there is still some risk that the company could be delisted.

Game Stocks are Hot
Activision, like other big video game software publishers, is being helped by the launch of a new generation of gaming platforms. Sony (NYSE: SNE) has released the Playstation 3, Microsoft (Nasdaq: MSFT) has launched the Xbox 360 and Nintendo (OTC: NTDOY) has debuted the Wii. As the new consoles hit the market demand for games has soared.

Activision recently revised is Q4 estimated revenue from $170 million to $200 million and forecast a fiscal 2008 top line of $1.4 billion. The company currently has two of the best selling games in the industry which are the "Call of Duty" series and Guitar Hero 2". The company's "Spiderman 3" with is association to the blockbuster film series is also expected to be a major hit.


Analysts Love the Stock
Since early December, four brokerages (Oppenheimer (NYSE: OPY), Needham, Nollenberger, and AG Edwards (NYSE: AGE)) have upped Activison to a buy. The analysts not only like the huge growth potential of the company's games as the new video platforms gain share, they like the way the company is managing its development operations. Acitivision recently bought DemonWare, a private company that make middleware that will aid in the development of online multiplayer capabilities. Since the entire process can cost tens of million of dollars, effective management of the process is essential to profits.

Industry Heats Up
To some extent, Activision's stock is being pulled up with shares in companies across the industry as the sales cycle is driven by new consoles. Take-Two (Nasdaq: TTWO), currently in a proxy war, trades near its 52-week high of $24, more than double its low for the last year. THQ (Nasdaq: THQI) trades at about $34 which is just a hair short of it 52-week high of $35.15. GameStop (NYSE: GME) is at a 12-month high of almost $33 against a low of under $18. And, the world's largest video game company, Electronics Arts (Nasdaq: ERTS), trades near $52, up from a 52-week low of under $40. And, most analysts have price targets for these companies that are well above where they trade now.

With the Playstation 3 launch in Europe in the last month, and mounting console sales for Sony, Microsoft, and Nintendo in both the US and Asia, the ride for Activision and its competition is likely to continue for awhile.

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