One of the best ways to develop a picture of any company is with the SWOT analysis -- a look at a company's strengths, weaknesses, opportunities, and threats. Today, I'd like to focus on Activision Blizzard (ATVI).

Last week, I looked at a risk analysis of the publisher of Guitar Hero and Call of Duty. Today, I'm going to view it through a different lens.

A pair of hands holding a white video game controller in front of a TV

Image source: Getty Images.

Strengths:

  • Its balance sheet. With more than $3.3 billion in cash and short term investments and no debt, it has the flexibility to obtain more intellectual property and talent. Competitors Electronic Arts (EA -0.57%) and Take-Two Interactive (TTWO 0.32%) don't have that level of resources. In fact, Take-Two has less than $200 million in cash.
  • Smoother revenue stream. With the merger of Blizzard and Activision, the combined company is not as dependent on the console upgrade cycle for generating the majority of its revenue and earnings. World of Warcraft, as a subscription service, helps to smooth out those lumps.
  • Commanding shelf space. With a large range of titles, Activision can ask for and get more shelf space at retailers, such as its two biggest customers GameStop (GME 2.33%) and Wal-Mart Stores. Getting the product in front of consumers with favorable shelf placement is just as important in the gaming industry as it is in the grocery industry.
  • Strong franchises. Even in the middle of a recession, gamers are willing to shell out to get the newest releases and bling. A winged horse "pet" for World of Warcraft, priced at $25, was estimated by some reports to be bringing in as much as $2.5 million per hour for a while earlier this spring.

Weaknesses:

  • Sometimes-difficult relations with developers. The recent firings and defections from Infinity Ward, developer of last fall's hit release Call of Duty: Modern Warfare 2, is a case in point.
  • Legal issues. Who owns what and what is agreed upon are contentious issues. The ex-Infinity Ward executives claim control of the Modern Warfare brand. The musical group No Doubt sued last fall, claiming that their images were being used for any song in Band Hero, contrary to what they said had been agreed to.
  • Recessions. Gaming, while a cost-effective means of entertainment, is susceptible to spending pullback during recessions.

Opportunities:

  • Pre-owned market. At the E3 conference this week, CEO Bobby Kotick said, "There's a $3 billion used game market that we do not participate in." If they decide to move in, that could be bad news for GameStop.
  • Mobile gaming. The company just released Guitar Hero for the iPhone. I wouldn't be surprised to see scaled-down versions of other games making it onto smartphones and iPads, either.
  • Motion control. Nintendo's Wii really changed things up with its motion-sensing control device. And Microsoft (MSFT -2.57%) has unveiled its Kinect, which tracks user movements without a controller. These go way beyond the guitar and drums of music games.
  • Online gaming. Move to the cloud and lessen dependence on consoles.

Threats:

  • Mobile gaming. Small studios can reach tens or hundreds of thousands of people through inexpensive downloads to smartphones. More competition for Activision and consumer's gaming time.
  • Console makers. They are often game publishers, too.
  • Long-in-the-tooth franchises. Guitar Hero is getting old, and sales aren't what they used to be. The next big flop could be just around the corner.

What parts of Activision's SWOT need more detail? Fill in the blanks by using the comments section below.