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Blizzard Feels the Winds of Change

John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

When Activision Blizzard (NASDAQ: ATVI) announced recently that it was laying off 600 workers from its Blizzard Entertainment branch, investors took notice. One might think that the maker of console and computer games such as World of Warcraft, Starcraft and the Call of Duty series wouldn't have to worry about financial troubles, but given the bankruptcy and cancellation rumors that continue to swirl around the once-mighty THQ (NASDAQOTH: THQIQ), investors aren't wanting to take any chances. Layoffs can be a major sign that a company isn't doing well, and in the gaming industry large-scale layoffs often go hand in hand with product delays and game cancellations.

In Blizzard's case, however, that doesn't seem to be happening. According to a statement released by Activision Blizzard, the layoffs will primarily affect employees who weren't part of the company's game development teams. Only around 10% of those affected are likely to be directly involved with game development, and the statement mentioned specifically that no one involved with the ongoing development of World of Warcraft will be involved in the layoffs.

The statement also pointed out that the company has four major game projects in the pipeline for release or beta testing later this year, including Diablo III and expansions to both Starcraft II and World of Warcraft. Though release dates haven't been set for all of the games mentioned, the company indicates that the layoffs will not affect internal release schedules at all where these properties are concerned.

Despite these reassurances, stock prices have dropped and were unable to recover by the time the market closed on Thursday. This isn't necessarily a bad thing, though, as the lowered stock price provides a good entry point for those who are interested in investing with the company. While there's a chance that the prices of Activision Blizzard's stock may take a few days to recover, it's a fairly sure bet that the prices will recover and then some.

Looking at the numbers, Blizzard has a lot in its corner. World of Warcraft is the most-played massively-multiplayer online game in the world, which is impressive given its age and the fact that it's one of the few subscription-based holdouts in the MMO world (though the game does offer an entry-level "endless free trial" for those who don't want to subscribe.) Despite losing over 2 million subscribers since 2010, there are still approximately 10 million people playing the game... and when the new expansion is released it's a good bet that a number of former players will come back for at least a little while. Starcraft II was at one point considered to be the most anticipated sequel of all time by a lot of people, and the new Starcraft expansion will continue the story started in the core game. Along the same lines, Diablo III is now considered the most anticipated sequel by many and is all but guaranteed to be a top-selling game. Blizzard's Defense of the Ancients game, a new game based on the most popular game mod for the original Starcraft, is also getting some major hype due to the ongoing popularity of the original mod.

Blizzard has four games that are all but guaranteed to be hits that will either be released or put into beta testing in 2012, and more projects in the works such as the "Project Titan" MMO game that is currently targeted for a 2013 release. And that's not counting games such as Call of Duty 9 and The Amazing Spider-Man made by other Activision Blizzard holdings. Just because things are changing internally at Blizzard doesn't mean that the company isn't poised to enjoy record-breaking sales over the course of the next few years.


Motley Fool newsletter services recommend Activision Blizzard. The Motley Fool owns shares of Activision Blizzard. Croaxleigh has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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