Leading publisher Activision has announced its first quarter financial results, and business couldn't be better. Net revenues were up an incredible 163 percent to $495.5 million and earnings hit an all time Q1 high, as net income totaled $27.8 million compared to a net loss of $18.3 million one year ago.

This record first quarter performance was largely driven by Guitar Hero II, which was the #1 best-selling U.S. console game overall, according to The NPD Group. Spider-Man 3 was also a big contributor as the #3 best-selling U.S. console and handheld game. Two other solid contributors during Q1 were Shrek The Third (the #1 kid's movie-based title in the U.S. for the months of May and June combined) and Transformers.

"During the quarter, we shipped more than eight million units of new game releases worldwide and for the first six months of the calendar year, Activision was the #1 third-party U.S. publisher on the console and handheld platforms. As a result of our strong performance, we are raising our fiscal year 2008 net revenue and earnings outlook and are increasing our fiscal year operating margin outlook to a company record," said a very pleased Robert Kotick, Chairman and CEO of Activision.

For fiscal 2008, the company now expects net revenues of $1.87 billion (up from $1.8 billion) and earnings per share of $0.51 (up from $0.45). For the second quarter, Activision expects net revenues of $250 million and a loss per share of $0.04.

"Our focus on growing our strong franchises and next- generation console leadership position is yielding superb results," added Kotick. "We intend to continue expanding our franchise portfolio, strengthening our development capabilities and improving our operating efficiency over the balance of the fiscal year. We believe this strategy will create strengths and capabilities that should enable us to continue growing our revenues, operating margin and earnings per share, as well as increase our return on invested capital."

Not only did Activision overtake EA for the top publisher slot in North America for the first half, but the company also fared well overseas. Activision's international publishing revenues grew 240 percent year-over-year, and in Europe, Spider-Man 3 was the #1 best-selling console and handheld game for the quarter in the U.K., Germany and France, according to Chart-track and Gfk.

[UPDATE] On the earnings conference call today, Kotick was casually mentioning some of the bands they have lined up for Guitar Hero III, and he let it slip that Metallica is actually on board. Up until this point, Metallica had only been signed for Rock Band from EA/MTV. This could be a huge lift for Guitar Hero this holiday in the battle of the bands, as Metallica is certainly one of the bands everyone's been clamoring for.

Kotick also noted that Guitar Hero Encore: Rocks the '80s had the highest first-day total sell through ever for an Activision title. He said that in general retailers have shown "unprecedented interest" in the Guitar Hero games. Activision is "significantly increasing" its guitar production capacity in preparation for Guitar Hero III, Kotick said.

As for other titles this holiday, Activision is planning on marketing games that are tied to DVD (or Blu-ray/HD DVD) releases of popular movies such as Spider-Man 3.

[UPDATE 2] Following the conference call, we followed up with Activision regarding the Metallica news. A representative confirmed not only that Metallica will be in Guitar Hero III, but that the song One will be a master track. One is from Metallica's "...And Justice For All" album released in 1988. It's also the very first song that Metallica produced a rock video for.