Activision Blizzard, Inc. (ATVI)

I was very surprised when I realized that Activision had merged with Blizzard entertainment

Looking forward, Blizzard entertainment is going to take the video game industry by storm over the next two years.

The second World of Warcraft Expansion pack is set to release within a year. Currently, this video game has a base of approximately 10 million subscribers. As with most all of Blizzard's expansion packs, the vast majority of active players will purchase this new product. People were wowed by the success of Grand Theft Auto 4. Well this expansion will most definitely meet the level of sales that is achieved by most full fledged video games.

Also on the horizon is Starcraft 2, the sequel to the best selling real time strategy game of all time. Judging from the material Blizzard has made available to the public on this game, it looks as though both the new graphics and game mechanics that have been developed for Starcraft 2 will both satisfy loyal fan as well as bring a fresh experience to younger real time strategy genre enjoying gamers that had never played the original.

As if those two behemoths were not enough, Diablo 3 is also lurking on the horizon. This game looks to be a mild revamp of the best selling Diablo 2. However, given the uniqueness of the gameplay in the Diablo series, this updated version of a wildy popular original has little to no competition in the PC games market.

Take into consideration that Blizzard has never launched a unsuccessful or lackluster PC game and you have one of the biggest gimmies I have ever seen.

My only fear is that Activision may drag Blizzard down. More to come on this eventually (after some hard research).

Video games are fun. This company makes them. People will buy them. The company will make money. Then they will make more video games. People will buy more. The company will make even more money. And then they will make a bazillion dollars and if you buy stock in the company you will make hundreds of dollars in like 2 seconds.

ATVI has outperformed the S&P 500 since November 2007. They have a solid balance sheet with a strong cash position and low debt. They have dramtically increased the R&D spending, and they have a couple of big releases about to hit the shelves (i.e. Starcraft 2). This will generate additional subscription income just like Warcraft does...oh and its near its 52 week low.

Merging with Blizzard was the smartest move any publicly traded company in the gaming industry has done in the past decade. Although some business decisions may interfere with Blizzard's patient pursuit of creative perfection, fans cannot complain about the line-up this company will be shooting out year after year. Creative perfection meets business efficiency.

They are sure to beat the market riding out their existing empire for now. I think they will be due to replace WOW soon (1-3 yrs) as people will tire of it and as with everything, it will get old. If they can keep it fresh, more power to them, but all big companies have eventually fumbled after a while and in gaming that could finish you. Also the possibility exists they might need a replacement for guitar hero soon too. That sounds like a counter to my outperform vote but I think that these names will last a while longer especially with call of duty out there. I'm just saying keep an eye on the gaming world its very dynamic and fickle.

Copied directly from my 6/29/05 writeup on the alpha protoype of Motley Fool CAPS:

"A long-term winner. Company is very well-positioned in interactive entertainment, a guaranteed growth industry for at least the next decade. I would like to see them develop some more of their own original intellectual property, but even just latching onto Marvel and others Activision has performed superbly.

Buy to hold."

Besides two top notch gaming houses merging for a true mega-content powerhouse, my assumption here is that the third installment of the insanely popular Diablo series (first developed by Blizzard) will outperform all other PC game sales. Basically, Activision/Blizzard are two studios from the old school gaming days that still crank out respected and great content.

It's companies like these that pushed the limits and forced the nVidias and ATI's to consistantly improve video cards. This company is a winner and will be around for many years to come.

Think of ATVI as ERTS' kid brother. Where one goes, the other is sure to follow! ATVI is smaller and clearly riskier but, for just those reasons, is likely to have more upside reward. Take advantage of the opportunity presented by the console transition and hold this one for the long haul.

Beaten down, the new platforms are leading into a new upcycle for the top game developers. Now's the time to jump into this temporarily unappreciated star.

At a P/E of 211.88, this is a trade. Buy it but watch it. I bought it this morning at $17.05. A good price for the best of breed. But be careful of it.
"Guitar Hero 2" continued to sell strong. The title was the best-selling game from independent publishers for the month, according to NPD data.

They have two movie tie ins. The Spider Man 3 game will sale big, and the game for the Transformers movie may sale well
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1. Billion dollar share buyback program (notice volume picking up as earnings date approaches). Tells me they know something internally that we don't yet and they are buying while it's cheap.

2. Everyone I know got a friggin Guitar Hero game for Christmas.

3. A couple billion in cash in the bank so not affected by any credit/interest costs that might have risen for other companies.

4. They are one of the only Vid game Co's that actually have a monthly revenue stream all to their own with World of Warcraft subscriber base growing at exponential rates, not the console that the games are being played on.

5. The only reason this stock is down,IMHO, is this: do a chart comparison between the nas, dow and atvi, it is simply following the market. I personally think this will change come earnings date.

6. I still own my original Atari system with a game that was an absolute hit back in the early 80's titled "Pitfall". Guess who made the game, you got it, Activision. With the merger of blizzard they just gained roughly 11.5 million subscribers paying an avg of $13.00/mo. Do the math, I did:)

Upcoming high-profile product launches for Diablo 3 and Starcraft 2 should bring in phenomenal results for Blizzard. In addition, they can continue to roll out expansions to WoW and keep the subscription income flowing.

Just from the Blizzard side of things... they have Starcraft II and Diablo III in the works. By the time we begin to recover from this recession and people begin spending money on entertainment, these games will be released or near release.

Several mishaps over Activision Blizzard's new game Wrath of the Lich King have led it's customers to lose confidence in a game that has several bugs and glitches. As a result several of it's customers have decided to unsubscribe due to poor Quality Assurance testing at Blizzard and more than 3 months of Beta Testing... despite all of that the game still has bugs and several latency issues.

On top of that, the company can do nothing right the first time except apologize over and over again.

There are better games out there with higher quality and bug-free that customers really should look after and what Blizzard needs to understand is that you can't "Re-invent" the wheel and as more and more expansions are released players have to decide if they want to get married or divorced.

With that there is a saying that "Nothing lasts forever" and it is very true with this company who is putting all of their bets on 3 franchises instead of making completely new ones in an effort to be more diverse. In that sense the company is lacking innovation compared to companies like Apple who keep making great brand new products at a much faster rate.

Those who know gaming understand how fanatic the Blizzard gamers are (ie. Warcraft.). With subscription revenue and brands that will continue to generate revenue for years to come, I see only upside to this company.

Careful. This is a great company with great potential. There has been a delay in the new starcraft II game, however leaving their 2009 schedule very very light. they're most like going to report disappointing earnings for 2009. In 2010 however, look for this to really take off, if they manage to release the version of starcraft, plus the new version of diablo.

Jim Cramer does not like game stocks because he does not understand them. This stock is as cheap as it's going to be for awhile. In 12 days COD Modern warfare is coming out. The $150 prestige edition for this is pre sold out online. They are expecting 12million sold by years end(only 2 months). Next year starcraft 2 and maybe diablo 3...golden tickets. 10-15 million people pay $15 or more a month for Warcraft and sometime in the future there is some secret MMO coming out. Throw a bull at Cramer while yelling "buy buy buy!"

Beautiful name, evolving market, good price and getting smarter.

I love the industry.Video games (whether they make learning fun, or bring the fantasy of blowing up helicopters to life) are an excellent source of entertainment. Activision has a nice roster of games, and will continue to be a major player with their Call of Duty and Guitar Hero franchises. I see them in the low 20's by year's end.