Lord of the CDC Corp
CDC Corp (NASDAQ: CHINA) stock rose today despite weakness in the general market. The stock rose more than 5% on higher than average volume closing at $2.44. Just for the record, I own a ton of CDC Corp stock. I bought it a long time ago at a much higher price than now so keep that in mind when you read my analysis. In any case, there’s some pretty exciting developments happening at CDC Games, a division of CDC Corp.
CDC Games is currently in open beta testing of a highly anticipated game — Lord of the Rings, which is scheduled for an official launch later this month. According to the company, the development and testing on this game has gone very smoothly and the creator of the game, Turbine, has confirmed this. This is very exciting for the company because other than Yulgang, CDC Games hasn’t really come out with another smash hit. With that said, LOTRO is looking pretty spectacular in the various screenshots and reviews I’ve read about the game.
The interesting thing to keep in mind is that companies that run these Massive Multiplayer Online Games (MMORPGs) don’t need 50 hit games to be profitable. The margins generated from these games are extremely high and therefore, it just takes one big hit to make company a smashing success. Look at The9 (NASDAQ: NCTY) and World of Warcraft. That one single game accounted for such a huge portion of the revenue and profits. The same applies to ChangYou (NASDAQ: CYOU) which recently went IPO with their flagship game “Tian Long Ba Bu”. Of course, that also underscores the risks with investing in these kinds of companies — the MMORPG giveth and the MMORPG taketh away! So when NCTY lost the WoW license, their company stock naturally tanked.
Therefore, the thing to watch out for is the overall response from gamers when LOTRO launches. Initial reaction will be critical. If the game gets anywhere NEAR the kind of success or attention that WoW or “Tian Long Ba Bu” gets in China, that success will become a game-changer for CDC Corp.
