Before E3, Activision Blizzard Still Stuck in the Mud (ATVI, ERTS, SNE, GME)

Activision Blizzard, Inc. (NASDAQ: ATVI) is probably looking for anything it can find to drive its share price higher.  Whether it is social gaming or more MMORPG platform games, The $13+ billion video game publisher is in a different boat compared to the large rival Electronic Arts Inc. (NASDAQ: ERTS).  Activision has just been dead money, while Electronic Arts had been painfully dead money up until early this year.

This week came news that the company is showcasing an innovative slate at E3, the 2011 Electronic Entertainment Expo, in Los Angeles from June 7 – 9.  Activision just announced that the beta for its much-anticipated online service “Call of Duty: Modern Warfare 3” may be available as early as July 14, 2011. While the full capabilities of the service will not be on display until the launch of Modern Warfare 3, (expected in November) the early release will give users a taste of the experience and allow the service to be tested by gamers already playing Call of Duty®: Black Ops. In the five days since its announcement, the beta has already attracted over 1 million registrants.

Last year, “Call of Duty: Black Ops” became the most pre-ordered title in its history and “Call of Duty: Modern Warfare 3” was noted as being significantly ahead of that pace.  Activision’s other current offerings also include Skylanders Spyro’s Adventure™ and PROTOTYPE® 2, Spider-Man™: Edge of Time, X-Men™ Destiny, The Transformers™: Dark of the Moon, and Wappy Dog.

One issue that we have had with the company is that it has kept its Activision brand site separate from Blizzard.  Maybe it wants the “Call of Duty” series to greatly outshine the “World of Warcraft” series from Blizzard, or maybe it wants to avoid cannibalization.

With all of the hack attacks hitting Sony Corporation (NYSE: SNE) and now hitting Nintendo (NTDOY), it seems that hackers might equally love to take down “the other monster” via World of Warcraft.  Is that a real threat, let’s just say “we’ll never know until we know.”  GameStop Corp. (NYSE: GME) has been turning itself around enough and becoming shareholder friendly enough that its shares have recovered handily.

Electronic Arts trades at $23.80 and its 52-week trading range is $14.06 to $24.79.  EA shares were at $40 to $45 before the end of 2008 and shares hit $60 back in 2007.

Activision Blizzard is harder to peg as a real long history because of the merger.  For the last two years this stock has been stuck in a trading range mostly between $10.50 and $12.50.  You can see it in the chart from BigCharts.com.  One thing it does have going for it is that it does pay a dividend.  In 2011, it paid a cash dividend of $0.165 per common share and that compared to a $0.15 dividend paid in 2010.  Our only suggestion on that front is that maybe a higher dividend could be paid, but more importantly it could move to a quarterly payout as American investors do not always want to hold a stock just for an annual dividend.

Thomson Reuters shows that a consensus analyst target is closer to $14.16 and most analysts have a positive ratings bias in the stock.  Part of the company is effectively an annuity business, and the other part is hit games.  We’ll see if the addition of the ongoing revenue model can help.

JON C. OGG