Battlefield 3 Will Be Big, But Call of Duty Will Still Win 4Q, Says MKM Partners' Eric Handler

Next year could also bring significant EPS growth to Activision ATVI. That's according to Eric Handler, a Managing Director-Sector Head/Senior Analyst at MKM Partners, who spoke to CNBC this afternoon. But while Call of Duty is the company's bread-and-butter, the game that's expected to boost Activision is none other than Diablo 3, the role-playing game that joined the Activision brand after the company merged with Blizzard. Handler also expects Activision's big competitor in the first-person shooter market, Electronic Arts' ERTS Battlefield 3, to ship 8.5 million copies in the fourth quarter. By comparison, Sterne Agee's Arvind Bhatia expects the Electronic Arts to ship 10 million copies. Handler pointed out that Battlefield 3 has had “very good PC scores,” as evidenced by the 93.37% ranking on GameRankings.com*. The Xbox 360 version is a little bit lower at 85.75%, while the PlayStation 3 version is at 87.50%. *Rankings are current as of 2:30 p.m. EDT. Regardless of the scores, Handler still expects Call of Duty: Modern Warfare 3 to come out on top, selling as many as three times as many copies as Battlefield 3. ACTION ITEMS: Bullish: Traders who believe that both Call of Duty: Modern Warfare 3 and Battlefield 3 will do well in the fourth quarter may want to consider the following trades:

• The success of both games can only help Activision and Electronic Arts' bottom line.
• By developing two equally impressive first-person shooters, many speculate that Activision and Electronic Arts could actually grow this part of the video game market, which is great news for both companies…
• …And could be even better news for Sony SNE and Microsoft MSFT, which have relied heavily on action games to sell their current-gen game consoles. Sony and Microsoft will need a strong shooter market to help make the next PlayStation and the next Xbox consoles a success.

Bearish: While it's important to note that there are and always will be fluctuations in the video game industry (as there are in all entertainment industries), those who believe that both games will cannibalize each other may want to consider this alternate position:

• Zynga's IPO is expected to arrive next month. If you feel that social games – not hardcore action games – are the future, Zynga's public debut may be one to watch.

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