Glu Mobile Acquires Two Developers as Game Consolidation Heats Up

As consolidation heats up in the games industry, Glu Mobile has acquired two game developers to double the capacity of its game studios.

The San Francisco-based company announced the acquisitions — Kirkland, Wash.-based Griptonite Games and Toronto-based Blammo Games — as part of its second-quarter earnings yesterday.

Over the past year or so, Glu has aggressively been trying to reinvent itself as a company that develops free-to-play games for mobile devices with features similar to those found on Facebook. Previously, the company was known for selling feature phone games around the world.

Following several acquisitions in the space — including the agreement by Electronic Arts to purchase PopCap for $750 million, and Zynga’s healthy appetite, which has included purchasing more than one company every month for the past year — Glu has been named as a potential acquisition target.

In this case, it appears to be getting out in front of the trend.

Over the past year, Glu has been fairly successful with such hits as Contract Killer, Bug Village and Gun Bros, mostly on the iPhone and iPad, but also increasingly on Android.

In the earnings call yesterday, Glu’s CFO Eric Ludwig explained that the acquisitions were due in part to Zynga’s competitive threat as the social games giant increases its mobile acquisitions. “Glu already has scale in sales, marketing and G&A function, but we have been capacity constrained in our development studio side,” he said, according to a SeekingAlpha transcript of the call.

Both of the acquisitions were paid for in stock.

Griptonite, which has about 200 employees, has been focused on developing titles for multiple platforms including consoles, Nintendo’s DS and the iPhone, but will switch over to making freemium games this year. Glu issued a total of 6,106,015 shares of common stock for the company, which, based on yesterday’s stock price of $4.60 a share, is close to $28 million.

Blammo Games, which was already developing two titles for Glu as a partner, will receive 1 million shares of stock with the potential to earn up to 3.3 million if it hits certain revenue milestones. Blammo is run by Christopher Locke, who was one of the creators of Smurf’s Village and Zombie Café, two very popular games.

As far as the earnings report, revenues totaled $17.7 million in the second quarter, increasing from $15.9 million in the year-ago period. The company also narrowed its losses to $1.8 million, or 3 cents a share, compared to $3.2 million, or 10 cents a share, in the second quarter of 2010.

For the first time, smartphone revenues from free-to-play games exceeded revenues from its legacy feature-phone business. It said that in the quarter, smartphone revenues totaled $9.4 million to leapfrog feature-phone sales of $8.3 million.


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