The Hidden Truth Behind Activision Blizzard, Inc. (ATVI)’s Outlook

Thus, with the next generation of the console wars almost upon us, consumers might put off spending on game titles for the current consoles. This would probably hurt Activision this year, since the launch dates would probably be set for late 2013. However, given the fact that Activision boasts of having the number one console title and has games with loyal following, it should bounce back next year.

The mobile threat

The transition in console generations seems like one of the reasons why Activision has guided lower for the year, and as I said, it should be back to speed after the next console generation takes over. However, CEO Robert Kotick has identified some more threats to its business, labeling them as “unproven business models.”

Declining sales of PCs and rising sales of tablets and smartphones might have something to do with this threat. Sales of gaming hardware have been on the decline in the past few years as mobile devices have taken center stage. Although they aren’t still at the level of an Xbox or a PC, they do provide a good and varied gaming experience without being too heavy on the pocket. In addition, the advent of novel gaming consoles such as Ouya, which is a video game console running Android and allows gamers to become developers as well, marks the changing dynamics in the video gaming industry.

Mobile devices are expected to hurt consoles and PCs, and the signs are evident. Nintendo, which launched the Wii U in November last year, cut its sales outlook for the year by 17%. The Wii U didn’t sell as well as expected in the holiday quarter and this is certainly bad news for the gaming hardware industry. A new device not being able to match its predecessor in terms of sales doesn’t make for a good reading for both hardware makers and traditional game publishers such as Activision.

The bottom line

Shrinking sales of gaming hardware devices and PCs haven’t affected Activision Blizzard much so far, but the company can’t remain immune forever. Thus, 2013 is crucial for Activision as the trends in the video game industry will unravel later in the year after Sony and Microsoft launch their next-gen consoles.

The company has time and resources on its side to enhance its existing portfolio of mobile games as a hedge against fluctuations in the traditional gaming industry. It launched five mobile games last year, and continues to invest in the platform. Hopefully, Activision would be able to turn this mobile threat into an opportunity in the future and become a leading player in the multi-billion dollar mobile gaming. But the transition won’t be without pain and investors should keep this in mind.

The article The Hidden Truth Behind Activision Blizzard’s Outlook originally appeared on Fool.com and is written by Harsh Chauhan.

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