Tuesday, November 3, 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

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