Even prior to the release of its third-quarter earnings, investors clearly had high -- no, make that stratospheric -- expectations from new issue Jamdat Mobile (NASDAQ:JMDT), a publisher of mobile games and wireless entertainment. The company closed yesterday at $32.35, valuing it at more than $600 million, or 25 times trailing sales.

The stock had doubled from the $16 IPO offering price in little more than a month. All the anticipation and excitement finally gave way, though, as a little air was finally let out of the hype balloon. While it reported far from even a mediocre quarter, the shine was clearly off Jamdat's penny; the stock dropped more than 20% following the release in after-hours trading.

Jamdat came through with third-quarter revenues of $9.5 million, up 133% from the Q3 2003, logging double-digit sequential growth. Earnings for the quarter were essentially nil after factoring in almost $1 million in stock-based compensation. Analysts following the company were not impressed and openly lamented on the conference call that they expected better.

The company made positive progress in many areas, reducing revenue dependence on a few products and a small set of operators in the U.S. such as Verizon Wireless (NYSE:VZ) and SprintPCS (NYSE:FON). Yet the company still derives 81% of its sales from the United States, and 20% of its total comes from bowling games.

International markets are more saturated with gaming-capable wireless phones, so Jamdat rightly acknowledges it must expand outside the U.S. to grow. The $70 million in cash it now sits on thanks to the IPO is already being spent on improving its presence with foreign carriers.

Dozens of other wireless entertainment publishers are watching Jamdat closely as well. Private companies such as Mforma, Digital Chocolate, Sorrent, and WireJack are working in lockstep to court the same carrier partners and customers. Each is jockeying for position in what's expected to be a significant shakeout in the sector. Insiders estimate there's possibly only room for a few more IPOs in the sector -- with Mforma a likely candidate -- while the rest will be consumed or die.

Eyes are also on a major entrance in the wireless realm from giant gaming companies such as Electronic Arts (NASDAQ:ERTS) and THQ Inc. (NASDAQ:THQI) each with resources that dwarf the pure wireless players in the mobile gaming sector.

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Fool contributor Dave Mock was once an avid gamer and has the blister scars to prove it. He owns no shares of companies mentioned in this article.