Activision Shows Pipeline Strength

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Activision Blizzard Inc. (ATVI) will display some of its upcoming titles at the ongoing Electronic Entertainment Expo (E3). This includes not only the much anticipated Call of Duty: Black Ops II, but also other well-known titles such as Skylanders Giants, TRANSFORMERS: FALL OF CYBERTRON, new Bond game, Spider-Man and Family Guy.

The highly anticipated sequel of Call of Duty: Black Ops is scheduled for release on November 13th for Microsoft Corp.’s (MSFT) XBOX 360 gaming console, Sony Corp.’s (SNE) PlayStation 3 system and the PC. However, this game is expected to face significant competition from Electronic Arts Inc.’s (EA) Medal of Honor Warfighter, which is slated to release in late October.

Then there is Skylanders Giants, the sequel to Skylanders Spyro's Adventure. Incidentally, Skylanders Spyro's Adventure was the best-selling console and handheld game between January-April 30, 2012 worldwide, according to The NPD Group, GfK, Charttrack and as per company estimates. The game comprises new adventures and 16 new characters and multiple mode gameplay. The uniqueness of the game lies in its gameplay where physical toys with the help of the magical Portal of Power take life forms in the digital space and face a number of challenges to save their world.

In TRANSFORMERS: FALL OF CYBERTRON, gamers can create their own characters and fight as AUTOBOT or DECEPTICON and take control of CYBERTRON, the war-torn home of the transformers. Next comes the super hero game, The Amazing Spider-Man, where gamers don the role of Peter Parker and fight some of most notorious super villains such as Rhino, Iguana, and Felicia Hardy to name a few.

In Family Guy: Back to the Multiverse, gamers can take up either the character of Stewie or Brian and embark on a journey to destroy Bertram, Stewie's evil twin, to save Quahog..Activision has also got in its pipeline the James Bond game - 007 Legends. The game features five classic Bond adventures and a sixth mission, which will be seen in the upcoming Bond movie-SKYFALL.

Looking at Activisions’ portfolio of games, it is evident that the company is set for a strong 2012. The company’s initiatives to strengthen its Call of Duty and Skylanders portfolio through the launch of new versions and content packs would be beneficial in the long run. Moreover, the company’s initiatives in reviving some of its old franchises, like Diablo, are expected to act as tailwinds. Additionally, Activision’s foray into the mobile gaming market, through the launch of World of Warcraft and Skylanders Cloud Patrol, is expected to be a long-term positive.

However, the softness in the video game industry and Activision’s limited presence in the social gaming market coupled with significant competition from EA and Take-Two Interactive Software Inc. (TTWO) the near term head winds. Moreover, lack of new titles (not sequels or downloadable contents) and over dependence on the old franchises, particularly on Call of Duty and World of Warcraft, are the other headwinds going forward.

We have a Neutral recommendation on Activision in the long term. Currently, Activision Blizzard has a Zacks #3 Rank, which implies a ‘Hold’ rating in the short term.

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