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Released on Saturday, September 10, 2011, 8:00 AM ET
Pittsburgh, PA (SpeculatingStocks) - Electronic Arts (ERTS) recently bought social gaming company, Popcap in a $1.3 billion transaction. This is the beginning of a consolidation of the social gamining industry. The smaller players are being bought up. ERTS is the old dog of the gaming industry in general, while Zynga is the new player. Zynga is a firm that has moved to take the lead in social gaming with its dominance of social gaming via Facebook.
Glu Mobile Inc. (GLUU) is a company that could stand to benefit from a consolidation of the social gaming space.
Glu Mobile Inc. designs and sales casual and traditional mobile games worldwide. The company creates games and related applications based on its own original brands and intellectual property, as well as third-party licensed brands.
GLUU has been straddling the $3.00 level for about the last month. The company is trading at a market cap of less than $200 million.
Glu Mobile Inc.'s fundamentals aren't superb, but they aren't terrible either. GLUU does have $26.4 million in cash on the balance sheet and no long-term debt. Revenue last quarter came in at $17.6 million.
The important point is that GLUU is a player in a hot industry. Zynga pursued Popcap, but wasn't willing to pay as much as ERTS for Popcap. It looks like Zynga wants to diversify onto other platforms, not just be a Facebook social game company.
GLUU's titles function on iOS, Android, Palm, and Windows Phone 7 devices.
GLUU also has hundreds of workers and gained further talent and assets by recently acquiring Griptonite Games and Blammo Games.
It looks reasonably possible that GLUU could be gobbled up in the consolidation phase of the social gaiming industry. If not, GLUU is still a great value around its current price.
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