Once a blue-eyed boy of the mobile gaming industry and investors alike, Glu Mobile Inc. (NASDAQ:GLUU) has seen a sharp downturn in its fortunes over the past six months. The stock has imploded drastically since hitting its 52-week high in July last year and now trades within 20% of its 52-week low. Moreover, the stock has become synonymous with volatility as investors have witnessed wild swings in stock price for some reason or the other.
When Glu reported its fourth-quarter earnings earlier this month, it became clear that it has lost some of its momentum. Despite delivering Street-beating numbers over the past three quarters, Glu has failed to seize the moment due to the gloomy guidance it offered on each occasion. For example, in the previous quarter, Glu’s revenue jump of just 4% was the lowest in the entire year.
A comeback in the offing
Glu’s smartphone revenue growth in the fourth quarter almost came to a halt. The company decided to delay half of its titles that were scheduled for release in the quarter on account of a strategic review by its President of Studios, Matt Ricchetti. Glu seems to be following a well-planned strategy of improving monetization from its intellectual properties.
Reading the trends
It is focusing on extending the life cycle of its hit franchises through sequels, apart from developing real-time action and strategy games. In addition, CEO Niccolo de Masi’s philosophy of “fighting not the current war but the next” seems to be the correct one since gaming on smartphones and tablets has picked up considerably while console sales have declined.
Moreover, Glu possesses the required expertise and technology to bring multiplayer gaming, and it had acquired GameSpy from IGN Entertainment last year for this purpose. Mobile devices are widely tipped to hurt traditional gaming consoles and their sales have been on the decline over the past few months.
It remains to be seen how next generation consoles fare later this year and the transition might not be in favor of traditional consoles. Game publishing behemoth Activision Blizzard, Inc. (NASDAQ:ATVI) guided lower than the Street for the full year just recently, since management isn’t quite sure of how next-gen gaming consoles would sell apart from being wary of “unproven business models.” Moreover, even Activision is looking to improve its mobile portfolio so that it doesn’t miss the mobile game.
Glu is the first name that comes to my mind when I think of mobile games, since I have had its titles on my different phones over the last seven years. Thus, when the smartphone category was still in its infancy, Glu was in the mobile gaming arena. And it has done well in this arena. The company’s games have featured regularly among the top grossing apps on the iOS and Play stores.
The previous quarter might have been a dampener as far as smartphone revenue growth is concerned, but that was due to launch delays. But Glu is going make that right through the course of the year. It plans to release 15 titles, and five of them would be in the current quarter. The release of sequels to famous games, such as Gun Bros 2 and Samurai vs. Zombies Defense 2 apart from a host of other titles, should help Glu reclaim its smartphone mojo this year.