Activision (ATVI) Guitar Hero raises the roof

Activision reported gigantic numbers relative to consensus, beating their previous revenue guidance by 70%. What is the point of guidance like that anyway? Particularly impressive, they shipped no new titles in the quarter -- this was purely inherent strength in the Guitar Hero and Call of Duty franchises. They'll be closing on the Vivendi acquisition in the near future, which will add World of Warcraft to their quiver. Frankly, they'll need it as they're creating some very difficult comps for themselves next year. Guitar Hero revenue growth is driven somewhat by initial guitar controller sales -- it's likely as the franchise ages, the mix will shift more to standalone software, which will help margins next year, likely at the expense of unsustainably high revenue growth in the core business.

Analyst estimates are intellectually dishonest at this point as they rely on company guidance which is conservative to the point of silliness. There's no near-term break in the story that I see though I am skeptical of some of the line-up for next year -- Kung Fu Panda, another James Bond game, another Spiderman game, another Madagascar game -- there's no crowd pleaser in that motley crew. Another Guitar Hero update and the layering in of Blizzard's World of Warcraft series is going to have to carry the year... but that's enough to keep Activision the best software story in video games.