Game On for Activision Shares

Activision Blizzard (NASDAQ: ATVI ) is continuing its strong finish to 2010 a
welcome relief to investors. The video game maker said Monday that Cataclysm,
the latest edition of its computer-based megahit World of Warcraft series, sold
3.3 million copies in its first 24 hours of release last week. That beat the
first-day sales by the games predecessor, Wrath of the Lich King , which sold
2.8 million copies in the first 24 hours of its release two years ago. But
Cataclysm also is the second first-day multimillion-seller for Activision in
less than a month. The first, the companys Call of Duty: Black Ops game, sold
5.6 million copies on its first day of release on Nov. 9. One could forgive ATVI
shareholders for being anxious for the second half of 2010, as shares had shown
an inability to move higher and stay there since the stock
markets post-financial crisis run-up in early 2009.  Before the release of
Black Ops in November , ATVI was trading at around $11 almost exactly where
it was this time last year.  The company recovered during its third quarter,
thanks in large part to PC game Starcraft II: Wings of Liberty released for
Microsoft (NASDAQ: MSFT ) Windows PCs and Apple Inc. (NASDAQ: AAPL ) Mac
computers in July, selling 1 million copies in its first 24 hours and 3 million
games during its first month.  The companys unexpected success in that quarter,
however, was a surge in World of Warcraft sales that brought the games worldwide
subscriber base up to 12 million. Whilethe surge was in part fueled by Wrath of
the Lich Kings release in China, it was still unexpected growth preceding last
weeks release of Cataclysm worldwide. Released at the end of 2004, World of
Warcraft has remained the tent pole of Activisions video game business. While
the company has had several industry-defining successes over the past half
decade the Call of Duty franchise earned more than $3 billion between 2003 and
2009 none have been as enduring as Warcraft . And no other game continues to
provide as much revenue after the initial point of sale. Unlike ATVIs
billion-dollar Guitar Hero franchise, Warcrafts market can never become
saturated since the game itself is an ever-evolving commodity. Its what is known
as a massively multiplayer role-playing game, a persistent game played
simultaneously by consumers all over the world who pay $14.99 a month to play.
(Subscription plans vary outside the U.S.) While the base game has been in place
since 2004, it has been augmented with secondary releases, or expansions, that
redefine the games features and introduces new content. Even though ATVI shares
are currently trading at about $12, and have climbed about 7% since the release
of Call of Duty: Black Ops near their 52-week high of $12.58 the stock still
could be a smart buy. Shareholders who held on through a tumultuous 2010 are
already recovering, and new investors could see significant returns based on the
fourth-quarter success of both Cataclysm and Black Ops . Its likely that
Cataclysm has performed even better than reported the 3.3 million-game sales
figure is based on retail sales only, not digital downloads. Considering that
BattleNet, the companys online home for Warcraft products online,is one of the
top five digital storefronts for PC and Mac games, its reasonable to assume that
a sizable chunk of release revenue is absent from this announcement. Still, new
buyers should keep a close eye on the companys activity early next year. While a
new Starcraft II release is planned for next year as well as a new sequel to its
Diablo game series, its not yet clear when theyll be unveiled. ATVI should
remain healthy into 2011, but traders may want to consider lightening up on the
stock if schedule delays begin to pop up. As of this writing, Anthony Agnello
did not own a position in any of the stocks named here.