Future of Glu

EA bought Jamdat for $684 million a few months ago consolidating my belief that the mobile industry has a lot more potential for growth. It might have been a good deal for EA, which is now the number one publisher and developer of mobile entertainment in USA and Europe, but there was a lot of speculation about the move. EA, being a powerhouse of entertaining games, could jump into the mobile market by themselves. Why did they need Jamdat as an accessory to do that? My guess is that EA must have figured out that this particular industry is far from being similar to the console gaming indsutry.
One positive aspect of the deal is that it got a ready-to-use mobile infrastructure, and most importantly avoided the resources needed to devise new processes from developing to porting games. But what does this deal mean to the flock of small companies striving in the market. What about the fate of Glu Mobile? EA has exposed its huge repository of console games to the mobile market. This could be a negative influence for the companies that are barely surviving. But for companies in a not-so-bad shape like Glu Mobile, this could mean enhancing the quality of their games. Just getting better would not be enough because of the mechanics of this industry. A potential customer (in this industry carriers are customers) would rely more on brand and why not if its EA supplemented by the fact that Jamdat was already numero uno in terms of revenue in US. Moreover EA is not restricted by cash flow. It could streamline a minor chunk of it into R&D for burgeoning prospects like mobile 3D. These things cumulatively could significantly hinder the prospects of other companies in the market. The deal has separated the best from the extant by a large margin.
This might result in a trend of M&A's (mergers and acquisitions) in the mobile industry so as to consolidate their position in the industry. Glu Mobile recently announced that they bought IFone, a UK based publishing house. Roughly around this time last year, Glu had bought Macrospace another developer and publisher in UK. But the stimulating factors for both acquisitons were different. Before the Macrospace takeover, Glu did not have a significant presence in Europe. Macrospace would augment Glu's existence in the European market. Furthermore, Macrospace would also add value in terms of its spectrum of games and engineering force. IFone is a totally different story. It is bought not to intensify Glu's presence in Europe. It is bought to get hold of the promising Atari licenses that it holds. Getting access to these licenses might prove pathbreaking for the company. But with all M&A's come the cost of integration. Though it might have been hard in case of Macrospace, IFone is more of a publisher which outsources its development. Moreover being geographically closer to Macrospace which is Glu UK now, the integration process would be much smoother in my view. The future of Glu depends largely on enhancing the quality, better marketing and distribution, and stategic alliances.

Disclaimer- This blog is a casual analysis of Glu and the mobile market in general. Some statements might be erroneus, untrue or analytically incorrect. The facts stated are true to the best of my knowledge.

To learn more about Glu Mobile go to www.glu.com