Archive | July, 2012

#Glu Mobile: Pre-announced Q2 numbers strong

30 Jul

Mobile gaming developer Glu Mobile pre-announced its preliminary financial results  for Q2 2012 on July 26th. The pre-announcement came following Zynga’s dismal numbers which led to a temporary sell-off in the Glu share of around 15%. However, as the company showed there is no negative readacross between the Zynga decline and Glu and this shows once again that Zynga’s problems are Facebook related.

“We are pleased with our preliminary Q2 results which exceeded the upper end of guidance for our tenth consecutive quarter,” said Niccolo de Masi, President and CEO of Glu. “Glu’s strong year-over-year growth was powered by our mobile-focus, lack of dependence on Facebook web users, and strength in male-oriented games.”

Glu’s preliminary Q212 results are:

  • Total non-GAAP revenue of approximately $24.2 million, up 35% year-over-year. This is above the company’s guidance of $20.5 million to $21.5 million.
  • Non-GAAP smartphone revenue of approximately $20.4 million, up 111% year-over-year. This is above the company’s guidance of $17.5 million to $18.5 million.
  • Total GAAP revenue is approximately $23.6 million and GAAP smartphone revenue is approximately $19.9 million.
  • Original IP contributed approximately 95% of non-GAAP smartphone revenues and non-GAAP gross margin is approximately 91%; GAAP gross margin is approximately 87%.
  • Non-GAAP Adjusted EBITDA is approximately $1.2 million.
  • Cash generated from operations of approximately $1.6 million; cash balance on June 30, 2012 of $24.5 million, which was above guidance.

“The timely acquisition of the Deer Hunter brand was an efficient use of capital, as Glu avoided paying approximately $1.4 million in royalties in the quarter. We are pleased with the prognosis for freemium mobile gaming in the second half of 2012 and our strong product release slate,” said Eric R. Ludwig, Glu’s Chief Financial Officer and Executive Vice President.

De Masi continued, “We will be launching the majority of our second half 2012 titles between September and December in order to capitalize on advertising seasonality and new consumer hardware introductions. As a result, we expect to achieve positive Adjusted EBITDA in the second half of 2012, shaped as an Adjusted EBITDA loss in Q3 and solid Q4 Adjusted EBITDA profitability.”

Glu is providing the following preliminary updated guidance for the second half and full year 2012:

  • Non-GAAP smartphone revenue for the full year is expected to be between $81.9 million and $83.9 million. This is above company’s previous guidance of $76.5 million to $81.5 million.
  • Total non-GAAP revenue for the full year is expected to be between $94.4 million and $96.4 million. This is above the company’s previous guidance of $86.7 million to $91.7 million.
  • Adjusted EBITDA profitability for the second half of 2012 with an expected loss in Q3 and a strong Q4.
  • Full year Adjusted EBITDA better than break even.
  • December 31, 2012 cash balance greater than $21.0 million and no debt.

Glu now plans to issue its final second quarter 2012 results on Thursday, August 2nd, 2012

Conclusion: Mobile is the place to be. Momentum continues to be strong and we would encourage everybody to get exposure to pure mobile plays such as Glu Mobile and G5 Entertainment. Analysts expect Glu Mobile to turn profitable in 2013 and the share is currently trading at 35 times expected 2013 earnings. Given the fast pace of growth in the app market this seems fair. Sweden listed G5 Entertainment is currently trading at 11 times forecast 2012 earnings and 6 times expected 2013 earnings. We are excited by the opportunities for Glu Mobile ahead – we are really, really, really excited about G5 Entertainment.

Nordic Investor

PS: Interested in how you can benefit from the fast growing app market? Check out our top-pick G5 Entertainment http://nordicinvestor.net/g5-entertainment/

#G5 Entertainment: Ranking check confirms positive momentum

29 Jul

Our most recent app download ranking check confirms the positive operating momentum that G5 Entertainment has been enjoying for quite some time now.  Its games are popular and it is publishing more and more of them.

(As always, we are screening the app market of Australia, Canada, China, France, Germany, Italy, Japan, Netherlands, Russia, South Korea, Spain, Sweden, UK and USA. Please note that due to technical problems we are currently not able to show comparable statistics for the Google Play markets – we are working to resolve this issue)

G5 Entertainment games among the top grossing Apple iOS charts:

G5 Entertainment games among the top grossing iPad charts:

G5 Entertainment games among the top grossing iPhone charts:

G5 Entertainment games among the top grossing Mac charts:

Nordic Investor

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#Samsung: Record quarter amid #Galaxy success

27 Jul

Samsung Electronics, the world’s top technology firm by revenue, reported on Friday a record operating profit of $5.9 billion for the June quarter, as rampant Galaxy S handset sales helped stretch its lead over Apple Inc.

September quarter mobile profits are expected to forge further ahead as the latest Galaxy model enjoys a sales boom before the next iPhone launch, widely expected in October, driving Samsung’s profit to a record of nearly 8 trillion won ($7 billion). The mobile business brings in around 60 percent of Samsung’s earnings. Profits of the handset division more than doubled from a year earlier and the flat-screen business swung to a profit as LCD prices stabilized.

Shares in Samsung, which also makes TVs and other appliances, flat-screens, and chips, jumped as much as 4.7 percent to a five-week high after the results, outperforming the wider market.

JK Shin, head of Samsung’s telecoms business, told Reuters on Sunday that sales of the Galaxy S III, the most aggressive competitor to the iPhone, were better than his initial forecast of at least 10 million units in the first two months after its launch in late May. It is also preparing a sequel to the popular phone-cum-tablet Galaxy Note later this year to counter Apple’s new product releases.

Samsung, which earlier this year ended Nokia’s 14-year reign as the top global handset maker, is estimated to have increased smartphone shipments to 50.5 million in the June quarter, nearly double the 26 million iPhones sold.

While the next iPhone will likely slow Samsung’s handset earnings growth, it will boost the Korean firm’s semiconductor earnings as Samsung is the sole producer of processing chips used to power the iPhone and iPad, and also supplies Apple with mobile memory chips, NAND flash and display screens.

Nordic Investor

#Amazon: Increasing focus on #app business

26 Jul

Seen on www.reuters.com:

Amazon.com has focused single-mindedly on consumers for much of its existence. Now it has a new obsession: developers. The world’s largest Internet retailer is ratcheting up its courtship of apps software developers as it pits its Kindle Fire — and potentially other mobile gadgets — against Apple Inc and Google Inc.

Games and apps are key to that effort, so Amazon is plowing a lot of resources into wooing this increasingly important community. Amazon sees the Fire as a way to spur sales of its trove of online content — from books to TV shows to music. But analysts say it is also taking aim at the booming market for mobile applications and games, increasing competition with platform operators Apple, Google, Microsoft Corp and Facebook Inc.

Amazon has assembled a team, overseen by Aaron Rubenson, that works with developers one-on-one to design, test, launch and market apps and games for the Fire. Amazon had begun hiring for this team before it launched the Fire in September, but the recruiting drive has accelerated since then, according to a person familiar with the company’s strategy for developers who was not authorized to speak publicly. An Amazon spokeswoman declined to comment.

“Amazon is a very viable platform and we are encouraged by the speed at which they are moving,” said Niccolo de Masi, chief executive of game developer Glu Mobile. “They have a very good chance of being the number three player in developer revenues, ahead of Microsoft, if they execute over the next few years.”

Apple, considered the mobile platform leader by developers, unveiled the iPhone in early 2007 and did not launch its App Store until mid-2008. “It took them about three years to really have a semblance of developer relations,” de Masi said. “Amazon’s gotten there a lot faster, which is a benefit of starting later. They are trying to compress what Apple did into a year.”

Amazon is moving fast because it wants a piece of what is expected to be a huge market for games, apps and other digital content. Lazard Capital Markets sees this growing 26 percent a year to $67.4 billion worldwide by 2015, with games accounting for more than $30 billion. “These are just the early chapters of a truly transformational story from a pure e-commerce player to digital media platform,” Lazard analyst Atul Bagga wrote in a recent note to investors.

Like other platform operators, Amazon typically takes a 30 percent cut of app and game revenue. This may be more profitable than Amazon’s original online retail business. Bagga expects profit margins of about 10 percent for Amazon’s digital media business, versus 3 percent to 5 percent for its core operations.

Strong developer interest in Amazon’s platform is crucial if the company is going to be a credible digital media player, Bagga added. If Amazon can pull this off, it may create a “virtuous cycle,” in which good apps and games encourage more people to buy Amazon devices, which in turn attracts more developers bringing yet more apps and games, the analyst said.

When Amazon launched its tablet in September, the Appstore was understaffed and some developers were frustrated because apps took several weeks to get approved, said Ted Morgan, chief executive of Skyhook Wireless, which supplies location data for Kindle Fire developers. But several developers said the company has improved this year. “They have hired and trained people to work with developers and that was clearly not there when they launched,” said Evan Conway, president of OneLouder, which designs social mobile apps for the Fire.

In July, Amazon hired Robert Williams, a business development executive from Microsoft’s Windows Phone unit, to help with developer outreach at its Appstore. “Amazon is not excellent at developer relations,” said Charlie Kindel, who worked with Williams as general manager of the Windows Phone developer experience. “Hiring people like Robert will help fix that.”

In recent months, Amazon has unveiled a slew of new services for developers, including in-app purchasing, a gaming leaderboard and cloud syncing add-on called GameCircle, and an online toolkit with design tips and sample code.

Most apps take less than a week to be approved now and Amazon has a dedicated team who test the apps to make sure they work on the Fire tablet and do not contain malware, according to the person familiar with Amazon’s developer plans. Once apps are published on Amazon’s platform, developers can see online reports detailing the number of downloads and what in-app purchases are being made, the person said. Amazon is much more willing to share such data with developers than Apple and Google, according to Lazard’s Bagga. “If you are a platform owner competing with Google and Apple you have to have something more,” the analyst said.

One developer, who has published on all three platforms, said Amazon is a lot clearer about how it will promote apps. The person did not want to be identified due to lack of authority to speak publicly. Amazon offers free app promotion through a section at the top of the Kindle Fire’s Appstore, which is curated by editors on Rubenson’s team. Developers can also pay to have their apps advertised and promoted by Amazon. The company has a “rate card” showing developers the cost of such promotions on various Amazon websites, the developer said. This is a big contrast to Apple and Google, which do not offer a paid option and are “opaque” about their curated lists of apps, the developer added.

Developers are most excited about in-app purchasing on Amazon’s platform. That is especially true in the mobile game area, where a lot of games are free but let users buy things while they are playing. When a Kindle Fire user downloads an app or game, it automatically links to Amazon’s payment system, which has the consumer’s credit card details on file. Apple has a similarly smooth payment system, however some developers said Amazon has an advantage because its customers are more accustomed to buying on its site.

“Users have a propensity to pay and are conditioned to pay for content,” said Yusuf Goolamabbas, chief technology officer at Animoca, a developer of mobile games. “Even with Apple, customers are not as used to buying things online.” That means Animoca is generating higher average revenue per user, or ARPU, from its games that run on the Kindle Fire. “A lot of developers, including us, have seen ARPU numbers that are very high,” Goolamabbas said. “For certain games they are the highest of any platform we work with.”

Conclusion: At this point, G5 Entertainment has some 20 games released for the Kindle Fire and is constantly porting more of its portfolio to this platform. A further development and a potential “Amazon-smartphone” are certainly interesting opportunities for G5, as it has enjoyed a great relationship with Amazon right from the start of the Kindle Fire.

Nordic Investor

PS: Interested in how you can benefit from the fast growing app market? Check out our top-pick G5 Entertainment http://nordicinvestor.net/g5-entertainment/

#Zynga: Big time Q2 earnings miss

26 Jul

Zynga, the biggest developer of games played on Facebook‘s social network, fell as much as 42% in extended trading yesterday after missing analysts’ second-quarter revenue and profit estimates.

Facebook, which reports its first quarterly results as a public company later today, also slumped as much as 10 percent in response. Zynga posted sales yesterday of $332.5 million, less than the average $343.1 million analyst projection compiled by Bloomberg. Excluding some items, profit was 1 cent a share, less than the 6-cent estimate.  The company posted a second-quarter net loss of $22.8 million, or 3 cents a share, compared with net income of $1.4 million, or break-even, a year earlier.

Zynga blamed the shortfall in part on Facebook, saying changes to the site made it harder for users to find existing games. It’s also competing with a growing number of applications on the social network and mobile devices. A drop in sales of virtual goods from the first quarter is a sign of fatigue among users, said Arvind Bhatia, an analyst at Sterne Agee & Leach Inc.

“It’s a disaster,” said Bhatia, who is based in Dallas. “It’s starting to look more and more like a fad, and any hope of a second-half recovery is shot with these kinds of numbers.”

The shares fell as low as $2.93 after the report yesterday. The drop in late trading added to the 49 percent decline in Zynga since its initial public offering in December.

Zynga, based in San Francisco, makes money by selling virtual goods within its games — say, a gun in “Mafia Wars” or a tractor in “FarmVille.”

Zynga cut its 2012 outlook for bookings, a measure of sales of virtual goods, citing Facebook’s website changes, which deterred users from returning to play older games. The social network is highlighting new games at the expense of more established titles, John Schappert, chief operating officer of Zynga, said in a telephone interview.

Facebook “changed some of the algorithms for surfacing, which affected player engagement,” Schappert said. Posts in a player’s news feed that promote a game and requests they send to invite their friends are no longer as prevalent, he said.

Facebook shares tumbled to as low as $26.50 following Zynga’s report.

Zynga said 2012 bookings will be $1.15 billion to $1.23 billion, down from an April projection of $1.43 billion to $1.5 billion. Zynga also said it expects 2012 earnings, excluding some items, of 4 cents to 9 cents a share, compared with a prior range of 23 cents to 29 cents.

The lower forecast was also prompted by a delay in the introduction of “The Ville,” a real-world simulation game Zynga released last month, and user declines in “Draw Something,” the mobile game it acquired with its $180 million purchase of OMGPop Inc. in March.

The company makes the five most popular games played on Facebook, according to AppData. “Texas HoldEm Poker,” with 35.2 million monthly active users, and “Bubble Safari,” with 28.2 million users, top the social gaming charts.

Three of Zynga’s oldest games accounted for 60 percent of its revenue in the quarter, with “FarmVille” contributing 29 percent of sales, poker making up 18 percent, and “CityVille” generating 13 percent, Chief Financial Officer Dave Wehner said on a call with analysts yesterday.

Zynga plans to enter real-money gambling by the middle of 2013, pending regulatory approval, Schappert said. “We are actively pursuing the development of a product in real-money gaming. It is not for the U.S. — it is for international” markets, he said.

The company expects to spend hundreds of millions of dollars acquiring game developers over the next three to five years,  CEO Pincus told Bloomberg in an interview earlier this year.

Conclusion: Facebook seems to be a sinking ship and anybody on board will drown with it. Zynga’s whole business model is based around Facebook and naturally it suffers now that everybody goes mobile. If you want exposure to gaming you ought to look at G5 Entertainment, a company that is 100% focused on mobile games for the likes of iPhone, iPad, Google Play etc – THAT is where the growth is!

Nordic Investor

#G5 Entertainment: “Nothing to worry about”

24 Jul

Nordic Investor received a few mails from engaged readers that were wondering what had happened to two of the most anticipated games  of G5 Entertainment. This comes in the light of G5′s initial announcement in early June, that it intends to release its first “physics platform game” “Jumpster” in July (see our comment from June 6th: http://nordicinvestor.net/2012/06/06/g5-entertainment-presents-jumpster-at-e3/). As the weeks passed it became clear that Jumpster will not be released in July. Also, in October 2011, G5 announced a high profile cooperation with US company HipSoft aiming to bring their “Build-a-lot” franchise to iOS and Android (http://nordicinvestor.net/2011/10/19/g5-entertainment-teams-up-with-hipsoft/). Ever since, gamers are eagerly awaiting the launch but no further announcement has been made.

So are there any underlying problems with these games? Nordic Investor reached G5 Entertainment CEO Vlad Suglobov, who just arrived from Moscow to Seattle for the Casual Connect conference where G5 is Platinum Sponsors. Vlad is one of the speakers at the conference  aiming to further strengthen G5′s relationships with developers and find new partners.

His answer to the question whether there are any serious issues with Jumpster or the HipSoft cooperation, was short and precise: “Regarding Jumpster and Hipsoft games – nothing changed. Things often take longer than expected. We have plenty of games in the pipeline and our revenue is growing nicely so there’s nothing to worry about.”

Nordic Investor

#Mobile gaming market poised to grow – Buy #G5 and #Glu

18 Jul

According to a fresh report presented on www.siliconrepbublic.com, the global mobile content market is expected to soar to US$18.6bn in 2017, jumping from US$6.5bn in 2011, and growing at a compound annual growth rate (CAGR) of 19% from 2011 to 2017.

In the overall global market, the US mobile content market was the largest regional market, with a revenue share of 30.3% in 2011, Mobile Content Market – Global and the U.S. Industry Analysis, Size, Share, Trends and Forecasts, 2011 – 2017 reveals. Moreover, faster adoption of mobile content in the region will increase the market share of the US to 41.0% in 2017.

The mobile content market is made up of mobile games, mobile music and mobile video. Mobile games were the largest market segment, with a revenue share of 53.3% in 2011. The segment will further consolidate its position with 61.7% market share in 2017. The global mobile games market was worth US$3.5bn in 2011, and is expected to reach US$11.4bn in 2017 with a CAGR of 21.9% from 2011 to 2017.

Reasons behind the growth in the mobile content market include continuous product innovations and advancement in mobile devices with high-end multimedia functionalities. In addition, increase in mobile bandwidth and the rising popularity of mobile devices among the elderly population are also growth factors.  Key factors that impact the mobile content market while purchasing mobile content include content features, innovation and smart devices in the market.

The report indicates that mobile music and video revenue is expected to decline with the growth in cloud-based services and thus would influence users’ purchasing decisions. Stakeholders may find the market-entry barriers to be on the higher side for the mobile content market due to higher competition in this segment.

We think it is an extremely smart move to be long mobile gaming companies such as G5 Entertainment and Glu Mobile.

Nordic Investor

PS: Interested to get exposure to the fast growing mobile gaming market? Check out our top-pick G5 Entertainment: http://nordicinvestor.net/g5-entertainment/

#G5 Entertainment / #Glu Mobile: App ranking check

16 Jul

Most of us are taking their well-deserved vacation these days, the Nordic Investor app ranking check is not. Looking at the recent share price development of G5 Entertainment one could think that there are clouds on the horizon but as you can see from the following charts, business continues to develop great and G5 Entertainment games enjoy high rankings in the global top grossing charts.

This time, we have also include the download statistics for Glu Mobile, the only real comparable peer to G5 Entertainment that is currently listed on the stock exchange. As G5, Glu Mobile focuses exclusively on mobile games. We are by no means negative on the Glu Mobile stock but we note that their rankings in the top grossing charts have not really shown the same kind of improvement as G5 has. Advantage G5! Glu Mobile is currently trading at 35x expected 2013! earnings, while investors can pick up G5 shares at 11x expected 2012 earnings. Is this kind of valuation difference sustainable? We think not.

(As always, we are screening the app market of Australia, Canada, China, France, Germany, Italy, Japan, Netherlands, Russia, South Korea, Spain, Sweden, UK and USA)

G5 Entertainment games among the top grossing Apple iOS charts:

Glu Mobile games among the top grossing Apple iOS charts:

Nordic Investor

#G5 Entertainment: Mid-quarter update shows margins drop; CEO comments

5 Jul

G5 Entertainment released its preliminary numbers for January – September 2012 today:

“G5 Entertainment announces preliminary results for January-June 2012. Revenue during the period is estimated to be 35 MSEK (19.1 MSEK in Jan-Jun 2011), operating results: 9 MSEK (7.8 MSEK in Jan-Jun 2011). This corresponds to about 83% revenue growth and about 16% operating result growth compared to the same period of 2011. These numbers are preliminary, not reviewed by auditor, and are based on management accounts and download reports. The results of January-June 2012 will be communicated in the interim report due on 15 August 2012. The management keeps earlier communicated goal for full year 2012 of 87 MSEK revenue and 30 MSEK operating result. The group has a mid-term goal to achieve annual revenue of 300 MSEK and operating result of 100 MSEK in the next few years.”

This statement implies Q2 revenues of around SEK 17.6 m and an EBIT of 3.3m, implying a margin of 18.4%, i.e. significantly below the 33% recorded in Q1. We were both somewhat surprised by the topline but particularly by the EBIT line. CEO Vlad Suglobov was kind enough to shed some light on these issues:

Nordicinvestor: Q2 sales of 17.6m are basically unchanged from Q1 levels, despite your success in the download charts around the world with an increasing number of games throughout the quarter. Is it that big of a seasonality in Q2 vs Q1, i.e. the overall app market is that much slower while you are actually gaining ground?

Vlad: Q1 is seasonally strong every year. Q2 seems a bit sluggish when comparing to Q1 every year. This is natural and seasonal. There is simply less money being spent by users in Q2 compared to Q1, in my opinion. Q1 has boost thanks to many holidays and gifts which are often smartphones and tablets which people are eager to user after they receive such gifts.

 Nordicinvestor: regarding your margin: are you taking any one-off costs in the quarter? if so, what nature are they? a margin of 18% vs 33% in Q1 seems quite steep of a fall. any particular reason for this?

Vlad: Regarding the margin, while revenue stayed around the same, we continued to build the company for the long term. That’s why there’s pressure on margin. We should see further growth in revenue in 2nd half of the year which should offset the expenses and we should be back to “normal” margin of around 30%. Comparing Jan-Jun 2012 to Jan-Jun 2011 is especially difficult since in Jan-Mar 2011 G5 had initial big success in Q1 with its games without increased investment in building the company further which only started at the end of Q2 2011. That’s why margin in Jan-Jun 2011 was around 40%, so we are comparing to very high base.

To get back to our “normal” margin, we only need certain growth of revenue, which we plan to achieve with all the projects we have coming out in the 2nd half of the year.

All-in all, all seems on the right track. The company is set to grow by some 80-100% p.a. over the coming years. Management is taking some additional costs this quarter which burdens the margin but benefits growth. G5 Entertainment looks extremely attractive at these levels!

Nordic Investor