Glu Mobile (GLUU) engages in the design, marketing, and sale of mobile games worldwide.
Under their new CEO, Niccolo DeMasi, they have changed their profit strategy. Rather than trying to make money off the mobile market by selling its popular games, GLUU is now focused on profiting from the concept of microtransactions. Thus, they are attempting to generate revenue from millions of smaller in-game transactions, usually of a dollar or less, and from in-game advertising. The game is “free” to play, but to get the full experience you must spend a nominal amount of money.
As of December 2010, GLUU claims one of its most popular games, Gun Brothers, was approaching 3 million downloads, averaging 175,000 a day. Last week it was announced Gun Brothers will be released through Facebook. The company plans to continue developing and publishing games at a rate of 25 games per year.
A few weeks ago GLUU announced a partnership with Nvidia (NVDA) to develop games that will run on Google’s (GOOG) Android platform. This was seen as a major step forward for the company, which amount to the stock hitting $2.90. Currently the stock has bounced back from a momentary pull-back and is trading in the $2.90 range.
The pull-back was partially the result of an additional stock offering by the company. Shares were priced at $2.05, which brought the stock’s price down. The company has also received $13.5 million from a private placement this past summer.
GLUU cut its losses in 2009 to $18.2 million, and indications are that it will report a smaller cash burn for 2010. For the three months ended September 30, 2010, Glu reported a $1.6 million loss, an improvement over a $4 million loss in the year earlier quarter.
I see this stock having significant growth prospects within mobile and social networking segments. I would expect it to continue its rise in value throughout 2011, as the social media hype swells and smartphones gain an even wider acceptance.
Being a relatively small company valued at $131 million, it’s not hard to imagine that GLUU will (or is) become a takeover target in the near future.
Disclosure: No Position – Looking to enter into a position in a matter of days/weeks.