August 6th, 2008 by Arjan Olsder Posted in Companies & M&A | 2 Comments »
Glu’s second quarter financial results came in yesterday. The good news
is a 45% revenue increase. The bad side however are the increasing
losses which result in a share value that is one fourth less then
before the release.
Glu reported a consolidated revenue of $23,7. This is an increase of 45% compared to Q2 2007. On the other end, the GAAP net loss was $6.6 million. Last year it was just $989,000. Glu named their acquisitions as one of the primary reasons for the huge losses.
As a direct result of these losses, he shares are declining in value like never before. When we started writing this article, the share price dropped nearly one quarter in value. Now, as we are publishing, the prices are even lower and a loss of one third in value could be expected around the end of the day. You can check Glu and other company’s on the market via our market watch portal.
Currently, Glu holds the third position in the mobile games market. Glu holds a lot o very interesting distribution deals with companies like SEGA, Codemasters and Konami. With the current value estimated at around 80 million, Glu would be a great acquisition for anybody looking to enter the mobile gaming industry. Perhaps it would even be interesting for a company like EA to increase their footprint in the market.
"We achieved record revenue driven by solid results in parts of Europe and better than expected performance in China, despite a softening in the US market," said Greg Ballard, president and chief executive officer, Glu. "New partnerships with Activision, Sony Pictures Television International, Sega and FremantleMedia Enterprises contribute to our exciting second half lineup, which will be our most active publishing period ever."
Glu’s top ten titles represented approximately 32 percent of revenue in the second quarter of 2008, compared to approximately 43 percent of revenue in the first quarter of 2008. The average revenue per top ten title was $752,000, down 14% from the second quarter of 2007. New titles released in the second quarter of 2008 included Mystery Case Files: Agent X, Speed Racer and Wedding Dash, as well as original titles from Glu such as Super Slam Ping Pong and Get Cookin’.
"The second quarter highlighted the growing diversification of Glu’s business," said Eric R. Ludwig, Glu’s senior vice president and chief financial officer. "We are experiencing increased strength in key international markets, which gives Glu a solid foundation to execute our global strategy. Additionally, the increased contribution from original IP, driven by our recent acquisitions, is having a favorable impact on gross margins. We did, however, experience some headwinds in the US due to the uncertain economy."
Glu also announced that Eric R. Ludwig, senior vice president of finance and interim CFO, has been appointed chief financial officer.
"Eric has been a leading candidate throughout our search for a CFO and has transitioned seamlessly into the role of CFO," Ballard added. "Eric has played an important role in developing and growing the global finance organization and his leadership and acumen make him the best candidate to drive Glu’s financial future."
Business Outlook
The following forward-looking statements reflect expectations as of August 5, 2008. Results may be materially different and are affected by many factors, such as: consumer demand for mobile entertainment; consumer demand for mobile handsets; carriers’ and distributors’ marketing to consumers, including premium deck placement; carriers’ maintaining their networks and provisioning systems to enable consumer purchases; development delays on Glu’s products; competition in the industry; changes in foreign exchange rates; the value of Glu’s auction-rate securities; Glu’s effective tax rate; the uncertainty of the US economy and other factors detailed in this release and in Glu’s SEC filings.
Why would EA want to acquire a company with such debt? Their footprint is large enough and growing, plus should this come down to bargaining i’m sure the EA name itself would see them snatch Sega/Codemasters/Konami deals from Glu should they wish.
Question in my mind, how long are Glu sustainable as a company bearing in mind their major assets are other peoples licenses and they’re losing revenue hand over fist. If i were Gameloft or EA, i’d be sitting back and biding my time…
http://www.youtube.com/watch?v=2qtOPlWax1Y