in Mobile Gaming

#Glu Mobile: Bullish interview with CEO de Masi

www.pocketgamer.biz has an interesting interview with Glu Mobile’s CEO Niccolo de Masi, who is clearly bullish about his company’s prospects and the ongoing M&A activity in the sector. More deals are coming – make your bets on who will be the next target.

After nine quarters of beating guidance, and now two quarters of rising revenue at the premium free-to-play publisher – even though it doesn’t expect to breakeven until Q4 – CEO de Masi is confident:   “We are sittting in the sweetspot,” he says of the current situation.

Pretty much every part of Glu’s business is on the up. It’s always been strong on iOS and Android, including Kindle Fire. All three markets are booming. Individual titles continue to generate strong quarterly revenue.  Blood & Glory did $2.7 million in Q1, Frontline Commando $2.3 million, the Contract Killer franchise did $3.8 million, while Gun Bros. – now 17 months old – still contributed $1.2 million, bringing its lifetime total to $9.1 million.  Glu’s even had a medium hit – its first – in the female-oriented casual market with Stardom.

Indeed, the company’s so confident about the future it’s spending $5 million of its $32 million cash pile buying the Deer Hunter licence from Atari.  “We’ve been licensing it for seven years, so you can see how much we’ve paid out in terms of royalties,” de Masi says.

We’re confident we can be very successful with the brand on mobile, plus it will look great on the Mac Store and Apple and Google TVs as they come down the line. It’s a really good fit for us as a premium 3D action game publisher.

De Masi also argues that deals such as GREE spending $210 million buying Funzio, and Zynga spending up to $210 million on OMGPOP just strengthen Glu’s position in the market.  “Any M&A activity is good for us,” he says, pointing out that Glu isn’t a one game company.  “As we’ve seen with Draw Something, if you have one game, it’s not going to stay at the top of the charts. Any title will drop over time. The thing is, we’re releasing 23 games in 2012.”

OMGPOP and Funzio are one, two or three trick-ponies, if you want to call them that. We’re much more sustainable. We’ve proved that scale works.”

As to why the likes of Zynga and GREE haven’t bought Glu Mobile, he says he can’t comment specifically.  Yet with a current market capitalisation of $270 million, de Masi points out that Glu would be a much bigger deal.  “We’re a $500 million cheque,” he says.  “So that’s an affordability issue. Spending a quarter of your cash is different to spending over half your cash.”

Pocketgamer comes to the conclusion that Glu would be a complementary purchase for Zynga, which doesn’t have much mobile presence in 3D action gaming, and for the likes of GREE and DeNA, who are desperate to get scale into their social mobile gaming platform in the west – exactly what Glu has.  According to pocketgamer, there is no doubt that some sort of discussions are ongoing. All companies in the free-to-play space seem to be possible takeover targets at the moment, but de Masi doesn’t seem to care that much.

We’ve had our IPO, so we don’t have VC investors who need to sell. Our stock is very liquid with millions of shares traded every day,” he says.

As we keep getting better, we’ll continue to get bigger, which will make us harder to buy. But we’ll be happy being a $1 billion market cap company.”

We’ll strongly recomend to be long the mobile gaming space, with G5 Entertainment being our top-pick (http://nordicinvestor.net/g5-entertainment/).

Nordic Investor

PS: Interested in investing in a Mobile Gaming / Technology strategy? http://nordicinvestor.net/2012/04/24/survey-nordic-investor-mobile-gamingtechnology-strategy/

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