Come May 15, the evil forces are going to invade the “Sanctuary” with the release of Diablo III by Activision Blizzard Inc. (ATVI). In the pulsating and riveting quest to banish the forces of evil, players can step into the shoes of any of the five characters: barbarian, witch doctor, wizard, monk or demon hunter.
The Diablo franchise (Diablo and Diablo II) has sold more than 20 million copies so far and the upcoming version is likely to add another 5 million, according to Cowen & Company. The game will be available through retailers in countries like the United States, Canada, Australia, Europe, New Zealand, Taiwan, Hong Kong, South Korea, Southeast Asia and Macau, thus making it a global launch.
The game will be digitally available on the Battle.net website and pre-order sales are already in full swing. Apart from English, the game will be available in varied languages such as Latin American Spanish, European Spanish, Brazilian Portuguese, French, German, Italian, Polish, Russian, Korean and Traditional Chinese.
The game will be available in different versions for Microsoft Corp’s (MSFT) Windows XP, Windows Vista and Windows 7. It will also be made available for Apple Inc.’s (AAPL) Macintosh. The game is priced at $59.99 for both online and DVD-ROM versions.
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 Inc. (EA) 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.
Moreover, the whole video game industry has been plagued by weak consumer spending and troubled economic conditions. According to market research firm, The NPD Group, US sales for February 2012 was down 20.0% from the comparable year-ago period to $1.06 billion. Despite the drop in revenues, Activision’s Call of Duty: Modern Warfare 3 held on to its position as the top-selling video game for the fourth month in a row in February 2012.
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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