Is Glu Mobile About to Go to the Next Level?

Mobile gaming company Glu Mobile's (NASDAQ: GLUU  ) turnaround looks for real. After a big misstep late last year, Glu Mobile's decision to cash in on the crucial September-December period this time by launching new games seems to be bearing fruit. The launch of the latest iDevices from Apple (NASDAQ: AAPL  ) and Glu's focus on delivering quality content, seems to have brought the company back on track.

As such, Glu was able to turn in a pretty solid third-quarter report at the end of October. The company beat estimates and its outlook was strong. However, it shouldn't be ignored that Glu's revenue declined 17% from the year-ago quarter to $21.7 million, while its loss widened from $3.6 million last year to $8 million in the third quarter. 

But then, Glu's outlook proved to be the saving grace. It expects revenue of $32 million at the mid-point, while the consensus called for $29 million in revenue. What's more, Glu expects to hit break-even in the fourth quarter, while analysts were expecting a $0.03 per-share loss. So, is Glu ready to make its mark in mobile gaming once again after stumbling last year? Let's find out.

Making the right moves
Deer Hunter 2014 was Glu's marquee title in the quarter. The game was the No. 1 free app in Apple's app store in the U.S. for a couple of weeks after being launched in October, and it has managed to consistently remain one of the top 10 grossing apps. Deer Hunter 2014's outstanding opening led Glu to offer a glowing forecast, as it expects the game to continue performing well. The company expects this title to become its biggest revenue generator so far. 

However, Glu management threw in a dampener with the announcement of a delay in the release of Frontline Commando 2 and Motocross Meltdown to the first quarter of the next fiscal year. Now, this might have disappointed investors, but could turn out to be a good strategy going forward.  

Playing with a plan
Glu intends to incorporate some of the insights that it gained from Deer Hunter 2014 into these new games. Taking cues from the success of that game, these two might also do well, especially considering that they will probably be launched in the New Year, just after Apple finishes its most lucrative quarter. According to Reuters, Apple was expected to account for two-thirds of Glu's revenue last year. 

It is expected that the new Apple iPads will sell in record numbers this quarter. According to Forbes, Apple might sell as many as 27 million iPads in the December quarter. Driven by the Retina iPad Mini and a stronger launch, Apple, might exceed the 22.86 million iPads it sold last quarter.  

Plus, the demand for the new iPhones remains strong more than two months after the device was launched. It is reported that Foxconn is currently manufacturing around half a million units of the device per day, according to The Wall Street Journal. Thus, as more iDevices are sold, Glu's games will have a better chance of finding their way into the hands of more players.

Considering that Glu's latest Deer Hunter has been successful on the iOS platform, it might be a good idea to bolster Frontline Commando and Motocross Meltdown by releasing them just after the holiday season, when consumers have finished shopping for gadgets. 

In addition to these two games, Glu has lined up RoboCop for the fiscal first quarter as well, coinciding with the MGM release early next year. Glu will also be releasing a tower defense game, titled Defenders & Dragons, in the first quarter.  

But, this doesn't mean that Glu won't be releasing anything new in the current quarter. It has lined up Eternity Warriors 3 for release this month. The new title in the successful Eternity Warriors franchise is more refined and offers gamers a new experience.  

The bottom line
All in all, it is pretty clear that Glu is placing a lot of stress on quality and is not rushing to release games just for the sake of it. Glu finally seems to be returning to its growth ways, and if it manages to hit the guidance in the current quarter, it would result in a year-over-year jump of 54%.  The company is focused on enhancing the potential of its games, and as such, the delay in the launch of a couple of titles is no big deal because Glu is looking to go up one level.

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