Contact: Scott Denne
Glu Mobile has built a business around revitalizing tired gaming brands for play on smartphones. In its latest effort, Glu sets out to turn around PlayFirst, maker of ‘Diner Dash,’ a casual game that was successful on PCs during the past decade but struggled to gain traction on smartphones and tablets.
Glu has shown a talent for transformations: at the time of its 2007 IPO, its business was selling feature-phone games through carriers, a business that was eviscerated by the launch of the iPhone that same year. Two years ago, Glu spent $5m to acquire the trademarks and other IP around the ‘Deer Hunter’ games from Atari and yesterday it topped the high end of its quarterly revenue guidance by 17% due to the strength of that series. ‘Deer Hunter’ accounted for 37% of its $47m revenue in the first quarter.
The purchase of PlayFirst, however, has some key differences from its ‘Deer Hunter’ buy. For one thing, with an enterprise value of $15.3m, the PlayFirst purchase is three times the size of the ‘Deer Hunter’ pickup and starts costing Glu money on day one, as PlayFirst lost $5.2m last year and its revenue is declining. PlayFirst generated $11.4m in revenue last year, but is currently only on a $7m run rate for this year. Also, Glu’s not grabbing IP it can build on – the company is getting an existing set of games that already attempted to crack the mobile market but failed to gain meaningful traction.
PlayFirst adds casual games to Glu’s portfolio, which has seen little success beyond action titles. Glu expanded its catalog of casual games with the $4.5m acquisition of Blammo in 2011, but none of those games have matched the success of its top action franchises. Only one of the brands from Glu’s Blammo buy broke the $1m revenue mark last year.
Despite having been out of the market for nearly two years, Glu indicated that PlayFirst may just be one of several deals to come. In conjunction with the announcement, the company filed to sell an additional $150m of its stock, in a move that Glu’s management says is intended to give it the capacity to pursue similar turnaround opportunities.
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