Activision Blizzard’s Holiday Cheer
Activision Blizzard’s (ATVI) Call of Duty: Black Ops video game launched in early November, and appears well on its way to becoming the biggest selling action title of the year. Within the first five days of release, sales of the game reached $650 million. The game has clearly benefited from considerable investment in development, as well as an aggressive marketing campaign and the success of the Call of Duty franchise in prior years. We anticipate continued success for this game going forward. Digital extensions may well enhance the earnings potential for this title. Looking further out, the Call of Duty franchise should prove to be an important growth driver for the company for years to come.
Electronic Arts and “Angry Birds”
Electronic Arts (ERTS) has recently purchased Chillingo, the U.K.-based publisher of “Angry Birds”. Terms for the deal were not disclosed. This move will add titles made for the iPhone and iPad to EA’s revenue stream, expanding its presence on the Apple platform. Game publishers have been buying developers of mobile and social games as those markets expand with the popularity of Facebook and smartphones. In November of 2009, Electronic Arts purchased Playfish to help establish itself in the market for casual, online play.
A Second Act for JDS and Qualcomm
Two of the most notorious stocks from the late 1990s technology stock bubble are back. Remember JDS Uniphase (JDSU) and Qualcomm (QCOM)? They were two of the highest flying tech stocks of the time, before the tech wreck of the early 2000s. Well, it appears these two companies have made a bit of a comeback in recent years. The share price of JDS Uniphase has rebounded handsomely after bottoming out in early 2009. Profit margins have improved nicely at JDS, and prospects appear healthy for the company’s end markets. This includes next generation wireless Internet, motion sensor video games, and 3D television. Meanwhile, Qualcomm stock has also posted a nice advance in recent times. Qualcomm appears well-positioned to benefit from the worldwide transition to entry-level 3G devices and greater smartphone penetration. We also expect strong demand for tablets that use the company’s “Snapdragon” chipset. Regardless, investors are advised to tread carefully with companies in this volatile sector. Much of the good news may already be reflected in the share prices of the aforementioned stocks.
Oracle’s Acquisition Strategy
Oracle (ORCL) has been active in pursuing acquisitions in recent years. The company has spent over $20 billion purchasing software providers. Earlier in the year, Oracle bought Sun Microsystems for $7.3 billion. This marks the company’s entry into the hardware and computer-chip markets. The addition of Sun/Solaris will play an important part in Oracle’s integrated solutions offerings. Despite a strong product line, Sun’s business had fallen on hard times. Oracle has made some progress shaping up Sun Microsystems, and is looking to dramatically improve profit margins here. More acquisitions appear likely going forward. (Oracle recently announced a $1 billion deal to buy e-commerce software provider Art Technology Group (ARTG)). When done right, acquisitions can serve to enhance a company’s growth prospects, and can result in cost savings and greater economies of scale. However, such a strategy is not without risk, particularly if a company makes large purchases outside of its core business.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.