in G5

Glu Mobile acquires two game developers

In connection with its Q2 2011 report, Glu Mobile announced yesterday that it has acquired two leading game developers: Griptonite Games and Blammo Games. The result itself was a notch better than consensus expectations as the company reported a second-quarter loss of $1.75 million, or 3 cents a share, compared with a loss of $3.22 million, or 10 cents a share, for the year-earlier period. Revenue was $17.68 million, up from $15.95 million. Adjusted loss was 1 cent a share. Analysts had expected the company to report a loss of 4 cents a share, on revenue of $16.45 million, according to a consensus survey by FactSet Research. I continue to like the underlying story of Glu Mobile but as long as the company is loss making I will not make any investment in the name. Especially not since I get the same exposure with my preferred pick G5 Entertainment, which is due to release its Q2 report on 15 August. Current management guidance is for an 2011 EPS of 1.90 but management has already indicated that this guidance will be upgraded.

  Griptonite Games is a leading developer of high-quality titles for handheld platforms. Based in Kirkland, WA, Griptonite employs approximately 200 people and has shipped dozens of titles on Xbox 360, Wii, DS, PSP, and iPhone platforms. Under the terms of the agreement, Glu has acquired Griptonite Games which includes its studio teams in Washington state, and will acquire integrated art and development support from Griptonite’s Hyderabad, India facility. Net cash on Griptonite’s balance sheet will support the transitional forward investment to new freemium product launches beginning in Q2 2012. The consideration for the Griptonite acquisition consists of Glu issuing a total of 6,106,015 shares of common stock.

 Blammo Games recently joined Glu’s gPartners program to develop two titles – the first of which will be launching in early 2012. Based in Toronto, Canada, Blammo is run by Christopher Locke who was one of the creators as well as producer of several freemium top ten grossing iOS titles including Smurf’s Village and Zombie Café. Under the terms of the agreement, Glu will issue the Blammo shareholders 1,000,000 shares of common stock as initial consideration and will potentially issue up to 3,312,937 additional shares of common stock if Blammo meets certain net revenue milestones during the earnout periods that stretch though March 2015.

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