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Glu’s Stock Climbing Fast, but Why?

June 17th, 2009 by Arjan Olsder Posted in Companies & M&A | 2 Comments »

Glu Over the past few days, Glu's (GLUU) value has started to climb up again. Since June 12th, the company's shares even passed the $1 line. What is triggering this sudden climb from $0.89 five days ago to $1.5999 at the time of writing?

Last year, and early this year, we reported a lot about the financial stability of the company. Greg even explained on MGB what the company was doing in order to get healthy again and settle their outstanding debts toward MIG.

So what can trigger this sudden climb? The first thing that comes to mind are the financial results which will be presented soon. Glu might have managed to actually cut costs enough. This would be great news for both the company and investors.

Glu is also launching various big name games at the moment. The new Transformers game is out and the new Ice Age game is coming. From what I remember, past Ice Ages games did very good sales (and the first one was a true pleasure to play).

Another thing we should not forget is that last week, the new iPhone was revealed and today, firmware 3.0 will be available to the consumer. Next to that, the old 3G will retail in the US at $99 which is a very accessible price and lays tough competition on the other vendors. Also we can expect a lot of second hand iPhones ending up with new happy consumers instead of just laying around. Glu has announced that it is putting more weight on it's iPhone portfolio.

Bet let's take a walk on the wild side. What about a buyout/acquisition? Within the industry, people have been speculating on that scenario ever since the company went below the $ 1 line and since about a month, MGB has received various rumours of investors peeking at the possibility of acquiring the company. If that is so, who would be interested in suck an acquisition?

Glu has a major licensing deal with Activision. Yet, it was Activision who shut down Vivendi Mobile after their merger because it believed more in brand licensing deals. Activision has always done that (though M-Forma in the early days) and it proofed very successful to them.

EA could also be a very interesting option for an acquisition. EA Mobile and Gameloft are getting closer to each other when it comes to revenues. If EA would acquire Glu it would partly grow it's network (though a big part would overlap) and seriously boost their portfolio. Next to that, the distance between EA and Gameloft would grow even further. EA paid a monsterous amount for Jamdat in the early days. Glu would cost them about a fraction of what they paid back then.

Gameloft is less likely to acquire Glu. Both have always been fighting for second place and Gameloft doesn't really have a big history of acquisitions. So being bought by Gameloft is not likely at the moment.

Seeking Alpha throws another light at the subject. The website suggests Apple and Nokia as possible buyers. Of both, Nokia would not entirely fit the profile. Though Nokia did acquire a navigation company, they never had a huge focus on content acquisitions. The company has it's focus on Ovi right now and has been shutting down several services lately. N-Gage is also rumoured to be less successful as expected. Buying Glu just to polish N-Gage would be too much. If Nokia really wanted to move there, there would be tons of other great developers to acquire.

Apple is also a bit far fetched. Apple has been rumoured to completely buy EA some weeks ago. We can't imagine that it would settle for 'just' a mobile gaming company. Also, Glu has a huge distribution network and we doubt Apple would be interested in bringing games to other platforms and networks.

    2 Responses to “Glu’s Stock Climbing Fast, but Why?”

    1. Blunderbuss says:

      1. fat credit from silly valley bank,
      2. lots of redundancies
      3. and also in all honesty – the company was underrated for a long time.
      being at 1.5 + reflects reality and proves badmouthing is not enough to destroy a company.

    2. Frodo says:

      It is good that badmouthing doesn’t bring too much damage to a good company, but overrated when they entered the market at $14? Sure they are worth more then $1 but $14 can’t be anything else then overrated.

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    Arjan Olsder is the Vice President of Pixalon Studios. Opinions expressed on this publication do not have to represent those of Pixalon Studios.


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