Glu Mobile Still Struggling With Smartphone Traction & Cash

Glu Mobile (GLUU) reported earnings after the close of markets today. Here are some highlights from their conference call:

• Revenue was above guidance, but still down 17% compared with the Q1 2009
• Glu Mobile is still only deriving 9% of its revenues from smartphones, which looks pretty weak compared with Gameloft, which generates 21% of its revenues from iPhone OS alone
• They are putting a big stake in 4 new original "mass-market persistent" game franchises that will launch before the end of 2010
• Forecasting Q2 2010 between $13.6mil & $14mil
• Revenue by region: 52% NA, 27% EMEA, 21% rest of world
• Avg revenue per Top 10 title in quarter was $791k
• Largest title accounted for 9% of revenue
• Verizon accounted for 18% of revenues
• 80% of revenues came from licensed titles
• Even though the company realized a positive cash flow of $1.6mil in Q1, ongoing payment obligations related to their $30.5 acquisition of MIG for in 2007 continue to drain their resources... currently they've got about $7.5mil in the bank
• CEO Niccolo de Masi & CFO Eric Ludwig plan to announce a solution to ongoing liquidity concerns by the Q2 2010 earnings call
• There was only 1 question from an analyst at the end of the call (after a long awkward silence)... kinda sad really

Readers Don't Believe Glu Mobile Is Stuck On Hands-On

Inspired by my January 5th post, in which I advanced a theory about why Niccolo de Masi jumped ship from Hands-On Mobile to Glu Mobile (GLUU), I asked readers the question: "Will GLU Mobile & Hands-On Mobile Combine In 2010?" The poll only ran for 5 days because I wanted to close it in advance of Glu Mobile's earnings call tomorrow. Based on comments I received (on and offline) to my original post, I guess I'm not entirely surprised to see that a 63% majority of responders believe that this deal is not going to happen, while 37% indicated that it would. I did not vote in this poll, but I do still think a deal makes sense and probably should happen if Hands-On still has some cash in the bank.

Is Glu's de Masi Move Part Of A Hands-On Hook-Up?

I've been racking my brain for the last couple of days trying to make sense of the news that Niccolo de Masi is leaving Hands-On Mobile, after just 3mos as its CEO, to run Glu Mobile. My first thought was that Hands-On was in such disarray, and so late to the smartphone game, that the restructuring I hoped was afoot turned out not to be worth pursuing in the end. My second thought was that Glu got so desperate in their protracted CEO search that they put more money on the table than a 29 year-old could possibly refuse... 'til I read their latest 8-K. Then I had a conversation today with an industry veteran who posed a novel, and ultimately, more interesting theory. What if de Masi is bringing Hands-On with him? What if this move is the precursor to a merger between the two companies?... now that's juicy!

From Glu's perspective this could be attractive because Hands-On allegedly still has a pile of cash left in the bank from the $29mil sale of its Korean division to EA in May 2008. For public Glu, with a depressed stock price vacillating on either side of $1 and a healthy appetite for cash, this could be an attractive fix. Glu would also benefit from Hands-On's valuable World Poker Tour license, which has been a cash cow since 2005, and its legacy Guitar Hero licenses (also big earners), which would be a nice complement Glu's newly launched Guitar Hero 5 title. For the investors in Hands-On, including Executive Chairman Dan Kranzler, this could finally be a way to go public... like they've been planning since the mobile paleolithic. It would also give Hands-On much improved smartphone capability (an area where Glu is finally getting its shit together) and restore its once impressive international distribution capabilities. Moreover, this move could create a real competitor, another $100mil+ (or close to it) game publisher, in an industry segment that's recently looked a lot like a two horse race between EA Mobile and Gameloft.

What do you readers think?

Breaking: Niccolo de Masi Named Glu Mobile CEO

Whoa! Former Monstermob wunderkind, and most recently Hands-On Mobile CEO, Niccolo de Masi has just been named President and CEO of Glu Mobile. This is shocking since he was just named to the head post at Hands-On Mobile this past October. It makes one wonder what on earth is happening at that long-struggling publisher. More to follow... Meanwhile according the Glu Mobile press release:

Niccolo brings to Glu a strong background of senior management and executive experience in the mobile gaming and content sectors. Most recently, Niccolo served as Chief Executive Officer and President of Hands-On Mobile, a mobile technology company and developer and publisher of mobile entertainment. From June 2006 to February 2007, Niccolo was the CEO of the London-listed mobile entertainment company Monstermob Group PLC, and prior to being named CEO, he was responsible for formulating and implementing Monstermob's growth and product strategy. Prior to joining Monstermob in 2004, Niccolo worked in a variety of corporate finance and operational roles within the technology, media and telecommunications (TMT) sector, beginning his career with JP Morgan on both the TMT debt capital markets and mergers and acquisitions teams in London. Niccolo has also worked as a physicist with Siemens Solar and within the Strategic Planning and Development divisions of Technicolor. Niccolo holds B.A. and M.A. degrees in Physics, and an MSci. degree in Electronic Engineering—all from Cambridge University.

In connection with the appointment of Mr. de Masi as Glu’s new President and CEO, the Compensation Committee of Glu’s Board of Directors awarded Mr. de Masi a non-qualified stock option to purchase 1,250,000 shares of Glu’s common stock pursuant to Glu’s 2008 Equity Inducement Plan, which is a non-stockholder approved plan. This stock option was granted to Mr. de Masi on January 4, 2010 and has an exercise price equal to the closing price of Glu’s common stock on the NASDAQ Global Market on such date.

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Mobile Holiday Cheer From John Szeder

'Twas the night before Christmas and Android was shipping
People's interest in iPhone rejections were slipping

AdMob was bought and Marvel was too
and the execs have finally gotten off of the GLUU

Deck managers everywhere were feeling rejected
And to social games many developers defected

Can you make more from each user? That really depends
If you can convince them to invite 20 new friends

Then post some achievements into their feed
And send gifts to their pals 'til their eyeballs all bleed

But you can play it for free, it doesn't cost money
Unless you don't want your avatar to look funny

We take PayPal and Amex and retail cards at the store
Unlock some premium levels and pay us some more

So I have this to say, in my Free Holiday Poem: Lite
Send me a nickel today, and I'll wish you Merry Christmas tonight!

~John Szeder

Why Can't Glu Mobile Find A CEO?

I just finished reading Stuart Dredge's timely interview, for Mobile Entertainment, with Glu Mobile's freshly appointed interim CEO & President (and current co-chair of the board) Bill Miller... and I must say that I continue to be dumbfounded, and seriously concerned by that company's inability to recruit a new leader. As you'll recall, their venerable CEO Greg Ballard announced his resignation back in July and now he's actually left the building. Miller claims to Dredge that Glu's "search process kicked off in midsummer - not traditionally a fertile period for headhunting." He's gotta be kidding, right? I can't imagine that there's been any period in recent history where there have been more available, eligible candidates on the market! There have been rumors floating around for awhile that the board is specifically looking for someone with the skillset to package the company up for sale... but, there's gotta be swarms of those characters orbiting near San Mateo. Is it simply that they're not offering a reasonable compensation package? Needless to say, Glu's investors should be asking lots of questions about how this search is being conducted and why they "weren't able to close" with the few principal candidates they've identified to date.

Unfortunately the dysfunction of this process has already wounded the company tangibly by contributing to the resignation of Jill Braff, the company's respected head of publishing, and more subtlety (but no less significantly) in terms of industry and investor confidence.... and the hurt is likely to linger in light of Miller's admission to Dredge that the company is just now beginning its 2010 planning process. And, of course, all this chaos will continue to inure to the benefit of Glu's competitors, particularly EA Mobile and Gameloft (but also, nimble smartphone-focused upstarts), that will continue to steal its market share and usurp its market opportunities. Glu Mobile needs strong, visionary and permanent leadership now!

Is Activision Using Zombie Publisher To Relaunch Mobile Ambitions?

Activision Blizzard (ATVI) announced yesterday that they've stepped directly into the iPhone Game App publishing fray with the release of Call of Duty: World At War: ZOMBIES, based on Treyarch's uber-successful console franchise. The 3-D, multi-player, Nazi zombie killer (is zombie it's own sub-genre yet?) was built by quality UK developer Ideaworks and retails in the US for $9.99. Initial user ratings are pretty good, but there aren't enough of them yet for it to be meaningful and we'll have to wait to see what the professionals say. I think there are 2 significant things to takeaway from this release:

1) This move makes it pretty clear that Activision licensee Glu Mobile (GLUU), which just released their Call of Duty: World At War: Force Recon mobile game on other platforms, is not going to be publishing Activision titles on iPhone anytime soon. Moreover, while this may just be a toe in the water, I think it probably means that Activison Blizzard is re-ramping their mobile publishing ambitions.

2) Assuming I'm right on the point above, then its super-ironic that Activision is using the account of the mobile games publishing unit they briefly had post-merger with Vivendi Games, and summarily dismantled last year to focus on licensing. Currently, in the App Store, Call of Duty: World At War: ZOMBIES appears as a Vivendi Games Mobile title. The good news is that under that moniker COD is in great company... VGM's only other title Crash Bandicoot Nitro Kart 3D continues to rock the Top 100 more than a year after release and is one of the all-time top grossing Apps on iTunes! The bad (sad) news is that Activision's lack of foresight (or patience) resulted in their losing a high-quality global team and to the extent they are rebuilding, it will inevitably cost them much more than if they had left Vivendi Games Mobile intact.

Revenues Big 3 Mobile Games Publishers Q3 2008 to Q3 2009

Stuck In Low Gear: Glu Mobile Q3 2009 Underwhelms

Ask any of my former employees at Universal Pictures... I used to anticipate Glu Mobile (GLUU) quarterly conference calls like an 8 year old kid looks forward to Christmas morning. With Glu being one of the few pure-play mobile entertainment companies publicly traded on a US exchange, with all the concomitant reporting that requires, this event provides a rare, clear lens into the health of the industry. That's exciting, right? The Q3 2009 call was no different... but I must say it was a disappointing Christmas and the patient don't look so healthy. Here's why:

• Uh.... where the heck is the new CEO? Didn't Greg Ballard announce his resignation back in July? Either no one wants this job (I haven't been asked, btw) or the board is fighting over what kinda leadership this company needs
• There was no acknowledgment that longtime, lynchpin exec (and quarterly call participant) Jill Braff left the company last month. Tacky like...
• $19.6mil in Q3 09 represents the 4th consecutive quarter of declining revenues (down 18% from Q3 08)... so much for being part of a growth business
• The company lost $4mil during the quarter and expects to lose between $13.1mil and $13.4mil in 2009
• Next generation platforms, including iPhone, Android and their experiments with social networking games only yielded $500k or about 2.5% of revenue... either iPhone hype is out of control or Glu isn't a meaningful player
• Royalty payments of $5.8mil, or 30% of revenue, in the quarter is still crazy high... this cost has gotta come down either through development of more original IP or the negotiation of better deals with content owners (did I just say that?)
• The Q4 title roadmap looks pretty good, and reviews of early titles have been pretty good, but I don't see anything that looks like a mindblasting breakout hit
• Verizon Wireless still represents 20% of Glu's business worldwide. As VZW's ecosystem opens up, and the #1 US carrier embarks on its experiment with an "app store", Glu will need to fight harder than ever to maintain share at that operator
• Only 1 analyst asked a question during the conference call (kinda sad)... have they all lost interest?
• On a positive note, the company did generate $2.7mil in cash... which they can use to lure a new CEO