Tuesday, June 16, 2009

Hot Glu...Speculation About Stock Run Intensifies

Mobile & financial blogs have jumped all over the Glu Mobile (GLUU) stock story that I first highlighted last Friday. The stock was up again sharply yesterday, rising to a high of $1.66 before settling at $1.49 (levels not seen since last October)...despite a broad sell-off on the US markets. That's an 86% jump in the last week and it's moving higher again today in early trading! A key catalyst for all the excitement is the company's silence about the matter...so of course anyone who cares has their own theory. Here's a sampling and some reasons I think these are not the right answers:

  • Hasbro (seems out of their comfort zone...though, they've embraced other tangential businesses, e.g. films)
  • Activision Blizzard (not sure how this make sense after they dissolved Vivendi Games Mobile)
  • EA Mobile (they're still trying to justify their $680mil Jamdat acquisition from 2005)
Industry Dynamics:
  • Better devices & better app platforms are making the mobile games space attractive/lucrative again (perhaps, but there is more competition than ever & price erosion is squeezing margins)
Company Performance:
  • The company has a bunch of high-profile licenses, including that for the highly anticipated "Transformers: Revenge of the Fallen", that will give it a competitive advantage (I know from experience, particularly in terms of movie licenses, there is no direct correlation between boxoffice & the success of a mobile game)
  • The company has better positioned its production resources to create games for smartphone app store platforms (sure, them & everyone else...including top rivals EA & Gameloft)
So, here are my top 2 theories...for what they're worth:
  1. Penny stock speculators smell a little bit of quality here and are driving the price up...and if so it will crash and burn very quickly
  2. The company is about to be purchased by another major player in the mobile space who is not currently a player in games...I'm thinking someone like Zed, who has been on an acquisition binge recently.

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