Mobile games maker Glu Mobile (Nasdaq: GLUU) saw itself slip deeper into the red but trumped the Street's bottom-line expectation in the fourth quarter. As a result, the company saw its shares jump 7% in extended trading after it came out with its earnings.
Let's see what the future holds for Glu and whether it's worth your dollars.
Stable revenue
Strong holiday period sales and success of gaming titles such as Contract Killer: Zombies, Frontline Commando, and Blood & Glory helped the company keep its revenue stable at $15 million in the quarter from the year-ago period.
Even though the top line has remained almost unchanged, smartphone gaming revenue leaped 340% from last year, now comprising three-fourths of the company's overall revenue. This is where the company is focusing and the spending took place.
Preparing the launchpad
Research and development expenses doubled to $13 million from last year. Glu expects to launch more than 20 game titles this year. And once we put into perspective the success of their games last year, one can expect them to rake in revenue once again. Moreover, costs also increased due to the acquisition of game developers Griptonite and Blammo.
While these initiatives resulted in a negative bottom line, I believe these one-time charges will fuel the company's growth for the long run.
Riding the smartphone revolution
Glu generates its revenue through freemium content (where products are initially free but a paid version is required to access advanced features), and around seven gaming titles of Glu feature in the top 100 grossers on the Android market. This gives me more reasons to believe that the company is going to get bigger with time as more Android devices are activated.
In addition, the company expects its games to gain more traction on Apple's iOS platform in Asia this year along with stable growth on the Android platform. Considering the rise in smartphone shipments, mobile gaming continues to be a hot segment and this will probably help Glu provide more thrust to its top line.
I expect Glu to ride the smartphone rage and perform well in the coming quarters. In case you still have any doubts about how this game developer will play ahead, add it to your watchlist.
