Article by Dario Ruff

Activision Blizzard (ATVI) is freezing out the competition, one hot title at a time.

As seventh generation consoles settle into their mature phase, the software developer is looking to extend its lead in the third-party publishing space. Activision Blizzard is simply the better trade in the video game software space, Electronic Arts (ERTS) and THQ (THQI) beware.

Over last winter’s holiday season, Activision boasted 3 of the 5 best selling games (Guitar Hero World Tour, Call of Duty 4, and World of Warcraft). Currently, Guitar Hero is outselling the similarly themed Rock Band from MTV Games by a 4 to 1 margin with sales climbing 84% year-over-year.

For the first quarter ending March 31st, 2009, Activision computed a revenues of 1 million, helping it earn a rock-solid 9 million (.14 per share). Ex-items, the company earnings 1 million, or .08 per share. Last quarter, Activision swung to a million loss, or .05 per share, from a year-earlier profit of million, or .15 a share. On May 14th, Activision raised their 2009 revenues guidance from .2 billion to .3 billion. GAAP earnings are expected to be .24 per share, accounting for 0 million in currency translation losses.

With multiple hot titles impending this summer including Diablo III, Starcraft 2, and its latest Transformers game, Activision has a potent lineup capable of driving earnings growth. This June, Activision’s entirely owned subsidiary, Radical Entertainment, releases its pioneering sandbox action game, Prototype.

Sentiment has clearly picked up for Activision after its disappointing fourth quarter results. Year-to-date, ATVI is up 32.5% yet is still attractive from a valuation standpoint trading near its 52-week low of .14 set on January 6. ATVI’s move above in May was a bullish indicator.

Activision sports about billion in cash reserves and no debt load, fueling speculation that the software publisher is armed and ready to be an active player in the M&A game. The most obvious target remains Take-Two Interactive (TTWO). But after Take-Two’s rebuttal of Electronic Arts in February of 2008, potential suitors have been skittish to approach the Grand Theft Auto publisher. As Activision sorts out its options – including recent share buybacks to the tune of 0 million as of early May – investors can be comforted by their healthy cash position.

While currency translations could dent cyclically-sensitive earnings going forward, improving consumer sentiment is suggesting a bottom amid consumer retrenchment. Even with the dramatic pullback in valuations for the gaming industry, sales of hardware, software, and accessories climbed over .3 billion last year, a 19% increase over 2007. While rising unemployment and consumer deleveraging concerns remain, Activision Blizzard is stocking up with a storm of hot titles that gamers will be clamoring for.

About the Author

Dario Ruff Sr. is a Search Marketing Specialist for BetterTrades. BetterTrades offers stock market seminars educating new traders how to make a profit from stocks and options

activision

Image Activision ownz Bungie by Dekuwa

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