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ATVI Launches MW3 DLC

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Building on the stupendous success of Call of Duty Modern Warfare 3, Activision Blizzard Inc. (ATVI) has released Call of Duty Modern Warfare 3 Content Collection #1, the new downloadable content pack on Xbox LIVE.

Touted as the “biggest DLC pack ever for Call of Duty” by Activision publishing, it not only contains four new multiplayer maps, but also boasts of two new Special Ops Missions (“Black Ice” and “Negotiator”). This would be the first instance when a downloadable pack would contain full-fledged missions. This adds a variety to the content pack that is believed to become a rage among Call of Duty fans.

Looking back, Activision’s content pack phenomenon started in February 2011 when it released the first content pack- First Strike for the Call of Duty fans. Ever since the success of First Strike, the company released subsequent content packs (Escalation, Annihilation and Rezurrection) for Call of Duty. All these releases positively contributed to the top line of the company and the recent release is expected to bolster the company’s top line for the forthcoming quarters.

Electronic Entertainment Design and Research (:EEDAR), a video game market research firm, estimates that given the increasing popularity among the Xbox 360 and Play Station 3 console owners, DLCs will generate $1.0 billion in sales in 2012. Activision, with its famous franchises and timely content pack releases, is expected to grab a chunk of this estimated DLC sales. Electronic Arts Inc. (EA), which also has some of the famous franchises of the gaming industry under its kitty, would also be eyeing for a share in the billion-dollar opportunity.

We believe that the release of Activision’s famous franchise games and their subsequent content enhancements will continue to benefit the company in the forthcoming quarters, driving its top-line growth.

We expect that the company’s continued initiatives to expand in the digital online business segment will pay rich dividends over the next 12-18 months. A healthy product pipeline for 2012 will also boost Activision’s top-line growth in the long term.

However, Activision continues to face tough competition from Electronic Arts and Take-Two Interactive Software Inc. (TTWO), which will act as a headwind going forward. Activision’s limited presence in the social and mobile gaming platforms will also impact its performance in near term.

In the long run, we maintain our Neutral rating. We currently have a Zacks #3 Rank for Activision Blizzard Inc., which implies a Hold rating in the short term (1-3 months).

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