How Bad Will 2013 Be for Activision Blizzard?

Shares of Activision Blizzard (Nasdaq: ATVI  ) are moving higher today, and rightfully so.

The leading video game maker posted blowout quarterly results on Wednesday night, boosting its guidance along the way. The holiday quarter is going to be another winner, fueled by next week's release of Call of Duty: Black Ops II.

However, it's never too early for investors to begin fretting about the year ahead.

Activision Blizzard may have excited investors by raising its outlook to an adjusted profit of $1.10 a share this year, but 2013 may not be as kind.

"We benefited from the extraordinary success of Blizzard's high-margin, record-shattering Diablo III and from a lower tax rate," CFO Dennis Durkin said during last night's call, going on to explain that those two items alone contributed more than $0.25 a share to this year's adjusted earnings.

The lower tax rate -- the handiwork of a one-time discrete item -- isn't going to repeat itself in 2013. There also won't be a Diablo IV next year. There will probably be an expansion pack out at some point in 2013, but it won't compare to the windfall generated by moving more than 10 million copies of Diablo III this year.

It will also be a challenge to sustain World of Warcraft's popularity. Activision Blizzard was able to keep its subscribers above 10 million, but it's been gradually trending lower since peaking at 12 million players two years ago.

It won't all be bad, of course.

Just as Call of Duty: Back Ops II is shaping up to break all-time sales records, next November's installment should be even bigger judging by the franchise's trend over the years.

Skylanders -- the industry's hottest retail release in 2012 -- has a good shot of building on its popularity bridging both games and action figures in the year ahead.

There are other pockets of likely growth, especially in China. An online version of Call of Duty is rolling out in Asia through Tencent, and (Nasdaq: NTES  ) continues to find success as the World of Warcraft licensee. The company revealed last night that the game's peak concurrent users hit a million players in China recently.

Activision Blizzard also has a couple of Blizzard-related releases in the pipeline, including a new massive multiplayer online franchise.

Obviously Activision Blizzard won't be the only one hoping to make a splash next year. Electronic Arts (Nasdaq: EA  ) is focusing on bigger splashes for its marquee brands. Take-Two Interactive (Nasdaq: TTWO  ) has finally established a springtime release next year for Grand Theft Auto: V.

Investors may as well enjoy the good news and the compelling valuation for now. Activision Blizzard will have plenty to prove in 2013.

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