Following another quarter of disappointing game releases, the mobile gaming developer Glu Mobile (NASDAQ:GLUU) has again thrown investors more curves. This time the news items were actually pleasantly surprising, including the announcement of plans to develop a game based on curvy Kim Kardashian, and the ultimate surprise of releasing a game developed for Google (NASDAQ:GOOGL) Glass.
Both developments are particularly intriguing considering the previous delay of games considered important for the fourth quarter. Neither of these games appear overly material to 2014 results, but it's notable that some considerable time was undertaken to develop these concepts and questions the ability to focus at the firm. Though impressive on the resume, will having the first game developed for Google Glass really provide any competitive advantage going forward?
The Kim Kardashian game has to be interesting considering the vast amount of followers the reality star has been able to obtain over the years. One has to wonder whether or not any of the followers will actually pay to follow Kim's advice in the game. If the game can replicate the success of the reality TV show, then it could be a big winner for Glu.
Kim has over 18 million Twitter followers and 15 million Facebook fans. The Glu Toronto studio that already focuses on the casual game genre with a slant toward Hollywood will develop the game. With a release date scheduled for late spring 2014, one has to wonder why the all-important fourth-quarter games were pushed out if the company has the time for this completely new game concept.
Google glass potential
The biggest issue with even bothering with Google Glass is that only around 10,000 devices have been sold to testers. IHS forecasts initial shipments of Glass to reach 124,000 this year and to potentially reach 6.6 million units sold in 2016. IHS predicts the total sold could slip to only 1 million units if Google is unable to lower the price. If IHS is accurate, the total global smart glasses market would only reach 10 million units by 2016. A level impressive for Google, but not so important for game developers.
SunTrust analyst Robinson Humphrey forecasts a higher revenue contribution from Glass users than normal desktop users of Google search, but the analyst only expects the product to contribute to 3% of revenue by 2015. Even by 2017, the analyst only expects revenue to reach around $3 billion, or still less than 5% of a revenue base expected to reach $84 billion.
The Spellista game developed by Glu Mobile is a word game that challenges players to solve, create, and share puzzles with Glass friends. Players use head controls for virtually hands-free participation as they explore nine unique levels of native game play. Naturally the benefits of developing for this platform go way beyond any revenue contribution, but Glu Mobile needs to focus on monetizing existing games instead of working on a platform that may never materialize.
Still no new games
Not counting the Spellista game that was released to a platform with about 120,000 devices, Glu Mobile hasn't released a new game since the very successful launch of Deer Hunter 2014 back in Sept. On the third-quarter earnings release, the company announced delayed games with the expectation that Eternity Warriors 3 would be released in Dec. A couple of other games were pushed into the first quarter of 2014. The month is now one third over and the Eternity Warriors 3 game is nowhere to be seen, leaving the very successful Deer Hunter release as the only money producer in the fourth quarter.
Glu Mobile continues to throw the market curves including a planned game for Kim Kardashian. While all the news regarding the first developed game for Google Glass and a reality star is initially exciting, the bottom line is that the company fails to release expected games on time. As an investor, the last thing you want to see is the company disappoint analysts with the game release schedule followed by the CEO on Bloomberg discussing a new game with no short-term revenue contribution.
The company offers a promising list of games to be released over the next few months, but after a year of delays it needs to hit this schedule to impress Wall St. The success of Deer Hunter 2014 could push the stock to new heights, but the company needs to focus on the game plan without getting distracted by the curves of hot new platforms and reality stars that won't pay off anytime soon.
Mark Holder and Stone Fox Capital clients own shares of Glu Mobile. The Motley Fool recommends Google. The Motley Fool owns shares of Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.