7 Reasons Why Glu Wants Shareholders To Approve Their $13.5mil Private Placement

This is from a Schedule 14A filed with the SEC on Friday July 23rd. I've highlighted some key points.

1. the fact that the proceeds from the Proposed Issuance will enable us to advance our new strategic direction and the development of persistent-state, freemium products;
2. our financial condition, results of operations, cash flow and liquidity, including our outstanding debt obligations, which required us to raise additional capital for ongoing cash needs;
3. our view that the proceeds from the Proposed Issuance will enhance our balance sheet;
4. current and projected challenging economic and market conditions, and general uncertainty surrounding forecasted economic conditions globally as well as within the mobile gaming industry;
5. the fact that the Proposed Issuance represented the best of several financing and other strategic transaction alternatives resulting from the extensive process undertaken by the Special Committee, with the assistance of our management and our advisors, in soliciting third party indications of interest in both a financing transaction and a potential sale of the Assets;
6. the fact that each of our stockholders who hold at least 300,000 shares, or approximately 1% of our outstanding shares of common stock, was given the opportunity to participate in the Private Placement; and
7. the fact that our stockholders would have an opportunity to approve the Proposed Issuance.

Some key adverse factors to the issuance that the company's board considered were...

• the fact that our stockholders who did not participate in the Private Placement will be diluted and the value of our common stock could be diluted;
• the fact that the ownership by the Investors of a substantial percentage of our total voting power may make it more difficult and expensive for a third party to pursue a change of control of our company;
• the fees and expenses to be incurred by us in connection with the Proposed Issuance; and
• the fact that the covenant in the Proposed Issuance prohibiting “variable rate transactions,” as described in further detail in the section entitled “Terms of the Proposed Issuance — Summary of the Terms of the Purchase Agreement” below, may limit our financing flexibility in the future.

I Switched: Why One San Francisco Exec Ditched His iPhone For An EVO

Guest post by Daniel Stein

------------------------------
I have been an iPod advocate since the very beginning. Since the device launched in 2002, I have lost count at how many iPods I have purchased. I have a shoe box at home that is filled with my old hardware – the original 5GB (engraved, even), an iPod Shuffle; 2 iPod Minis (that I used with my Nike+ system); 2 Nanos, an iPod Touch (can’t remember why I bought that); a 60GB and 80GB iPod; and a few more that I am sure I forgot to mention.

When the iPhone launched in 2007, I was one of the first to own it. Since then, I have replaced or upgraded my iPhone 4 times. When the app store launched in July 2008, I was blown away. It made me realize how powerful mobile and location-based computing could be. It was probably the single most game changing device that I had ever experienced. It tied together entertainment, communications, social media, music and productivity in a simple, easy-to-use and very cool-looking package.

All that said, in early July of this year, I threw away my iPhone, paid my extortion money to AT&T to cancel my account and switched to Sprint and the HTC EVO. Regardless of how cool the iPhone was and how powerful the applications are, I made the decision that the reliability of the phone was more important than the power of the applications.

At the time I switched, I was dropping about 15-20 calls per day. Generally speaking, about every call over 3 minutes would be dropped at some point in the conversation. There was no rhyme or reason to when a call would be dropped. There was no pattern, no dead patch, no spotty reception. One minute you were there, the next minute you were gone. It was driving me insane and I eventually got to the point where I couldn’t take it anymore.

What I found when I switched was that I really did not give up as much as I thought I would. Although the Android market didn’t have near as many applications as the iPhone, it had many of the same applications and everything that I consistently use. Some of the native apps (like Google Maps) were actually much better than the apps on the iPhone. Best of all, the phone worked, everywhere and all the time. This may sound absurd to say in 2010, but having a phone that you can rely to simply work as promised changed my life.

Don’t get me wrong, the EVO isn’t perfect. There are a lot of shortcomings that I would love to see fixed in the future, but overall I am very happy with my decision to switch. Here is a quick list of pros and cons I have expected with the device.

PROS

• Phone: Phone works great. I have had the EVO for over three weeks and have not dropped one call. There are a few “dead” spots that I have noticed in San Francisco and Oakland, but I assume that is expected with any service.
• Apps: The Android Market has far more apps than I expected. There isn’t anything that I am “missing” from the iphone.
• Mapping: The mapping software and turn-by-turn navigation was seamless, fast and accurate.
• Social Integration: Integration with my Google, Facebook, Twitter, Flickr account, etc. worked right out of the box integrates with your address book, mail and SMS features.
• Camera: The 8 mega-pixel camera and flash takes incredible pictures.
• Sprint HotSpot (i.e. Tethering): By a simple click of a button (and an extra $29.95 per month), you can turn your mobile phone into a sprint mobile hotspot and share internet service to your Mac, PC or other device.

CONS

• Battery Life: The battery life of the EVO is horrible. The first time I traveled with the device, it fully discharged in about 3 hours. Since then, I purchased a portable charger and reconfigured it to use less power.
• Usability: After using as iPhone for so many years, I found the interface clunky and unintuitive. It took me a few weeks to feel “at home” with the device.
• Size: The EVO is big. A co-worker of mine calls it the Hummer of smart phones. It doesn’t bother me, but it may be too big for some of you.
• Typing: Typing without a physical keyboard is still frustrating. I find myself making many mistakes on the the any virtual keyboard, but the autocorrect on the iPhone worked pretty well. The autocorrect on the EVO doesn’t work near as well.
• 4G: I am not really sure what this means, as I have never been able to access 4G. I am starting to think it’s like turning your stereo to 11. It doesn’t really exist, but it sounds very powerful.

Daniel Stein is Founder & CEO of the digital advertising & branding agency Evolution Bureau

Dueling Tweets Highlight Polarized Views On Windows Phone 7

Silicon Alley Insider picked up an overwhelmingly positive review from a comprehensive Gizmodo story, while PocketGamer.biz covers a decidedly negative take from a reviewer at InfoWorld. I'm sure we're going to be hearing many more opinions on this subject as Microsoft's long-delayed, high-stakes smartphone OS prepares for its October debut.

Select Game Publisher iPhone Stats

Sorry about the eye-chart, simply click on the image above to see a bigger version.

I compiled this little spreadsheet for kicks (and 'cause I haven't looked at the AppStore in awhile) based on iTunes data for all the major games publishers I could remember on a random Wednesday morning (let me know who I'm missing). These stats are for iPhone and iPod touch games only, not iPad and are for the US version of the store. BTW, I've heard a lot of folks whine that Apple will occasionally, indiscriminately erase Customer Ratings during version upgrades... making these numbers a poor indicator of App performance. OK, I'm not sure if that's true (and shame on Apple if it is), but if you believe it you can take those numbers with an appropriate grain of salt. That said, here are my initial observations based on this data:

• British publisher Chillingo (including its Clickgamer subsidiary) is a friggin' powerhouse!... with a plethora of titles and more than a couple superstars, they might well be generating more topline revenue than any other games publisher on this platform, right?
• Digital Chocolate has a large number of titles, but almost 50% are free and it doesn't look like their top paid title is a superstar
• The recently combined entity of ngmoco/Freeverse is a major player
• I bet Lima Sky is the most profitable iPhone games publisher... Tapulous & Ludia would be contenders but their 3rd party licensing costs have gotta be substantial
• At first blush, Disney's recent Tapulous buy looks pretty genius (Tap Tap is a juggernaut), but their success isn't exactly a fresh story and they do have some of the traits of a one (or two) hit wonder... we'll have to see
• The distinction between paid and free apps will become less meaningful as freemium products, featuring in-app purchases, become more the norm on the platform... but for now most free apps are simply barkers for their paid compadres
• Happy to see that I-play (which has been dead quiet in the press lately) is making a pretty decent go of it relative to some of its mid-tier, old-timer peers and that my favorite film-based license (Fast & Furious) is still their trophy title
• Firemint is awesome, but it's definitely time for their next big thing

Let me know what you all think.

Consumer Reports Can't Recommend iPhone 4... Without Duct Tape

HotStocked Takes On The Curious Case of Amico Games

It turns out that Amico Games Corp. (AMCG), the former Chinese mining company that magically morphed into a public Java & WAP mobile games publisher (that no one has ever heard of), is even too weird for the jaded penny stock set. HotStocked.com, in a post that included the video above, expressed concern about a recent story (that was linked from the company's website) that referred to Amico as the "largest U.S. steel grating producer." What HotStocked probably doesn't realize is that there's a proud tradition of this sort of shape shifting nonsense in the mobile entertainment space, which features other public companies whose SIC codes indicate they're primarily in the auto repair or restaurant business... which, in those particular examples, they probably should be.

Mobile Content Developers' Platform Proclivities

See entire SAI article.

Motricity's I-Pee-Ew!

Drones & Clones Gotta Jones For Them iPhones

Update June '10: Enterprise Values of 21 Public Mobile Entertainment Cos Including Motricity

Hypothetical SWOT Analysis For DeNA Roll-up of Glu Mobile, Hands-On & Digital Chocolate

As I've been blabbing about for months, the established publishers in the mid-tier of mobile games are languishing under the new smartphone app store paradigm, as the two biggest players (EA & Gameloft) have consolidated power, and nimble newcomers (Firemint, Lima Sky, Chillingo) have seized marketshare. The competitive advantages these guys once enjoyed (carrier sales teams, the ability to port to a thousand devices, licensing relationships), have become expensive burdens, and most lack the resources to make wholesale changes to their businesses. In light of this, I've often wondered if it would be feasible for a company, with some vision and cash, to roll-up a few of these guys in the interest of unseating the top players and creating a true smartphone games powerhouse. For fun, let's imagine a scenario wherein Japanese social mobile gaming powerhouse DeNA, with its $530mil in revenues, almost $400mil in cash & ambitions to put a stake in the ground outside Japan, considered buying Glu Mobile, Digital Chocolate and Hands-On Mobile (for like $100mil, right?). What would a SWOT analysis for this "Newco" look like?

Strengths (Internal)

• Combined annual revenue of ~$125mil puts Newco within striking distance of Gameloft
• 98 Paid iPhone Apps featuring quality franchise titles like Deer Hunter, Glyder, World Poker Tour, Kitten Cannon, Brick Breaker & Tower Bloxx
• Interesting leadership potential... The icon: Trip Hawkins & the upstart: Niccolo de Masi
• All global HQs are in Northern California
• Studios in Finland, China & US
• Global distribution capability
• Healthy balance of original & licensed IP

Weaknesses (Internal)

• Cash... DeNA would have to fix that
• Re-branding would be required, none of these brands is perceived as a winner or has meaningful consumer cache... plus there's no combination that doesn't sound X-rated
• With over 500 employees... there would need to be some downsizing/consolidation
• $20+million in debt
• Reconciling investors & boards won't be a job for the faint of heart
• Scale sometimes leads to inertia

Opportunities (External)

• Unify all games with OpenFeint's social gaming/app discovery platform (in which DeNA has a 20% stake)
• Build in-app purchases into as many titles as possible to maximize longterm revenue potential
• Historic carrier relationships might become valuable again as Verizon, AT&T, et al take a larger role in managing Android Market
• Take all components of Newco private, clean 'em up and then spin it back out as an IPO when market conditions improve
• Take cue from Zynga in terms of marketing on social, new & traditional media

Threats (External)

• Platform consolidation and platform dependency (when Apple changes the rules, it hurts)
• Continued price erosion
• Competition with other forms of gaming & entertainment for consumer discretionary dollars
• New, well financed, market entrants

I'm sure Newco would appreciate your unpaid consulting, in form of comments. I'll add to and adjust this over the next few days based on your input and my own random inspiration (brain farts).

Verizon Top 10 New Titles For 2010... So far

Well it's E3 time again, and while mobile games publishers & industry pundits continue to perseverate about the iPhone, Verizon Wireless took the opportunity to remind the world that they keep on keepin' on. Apparently their deck still has over 350 games, and lest you believe it's still all about Tetris, Bejeweled & PacMan (which it kinda is) they issued a release highlighting their Top 10 NEW titles for the 1st half of 2010. Shout out to 2 of my favorite small publishers, GOSUB 60 & Sonic Boom for making the list... I hope this is translating into decent downloads/revenue. Hey, while most publishers manically pile their games on top the 10s of thousands of others in the App Store or into the difficult to monetize anarchy that's Android Market, I think it's a legit, smart and potentially lucrative counter programming strategy for some to focus on the carrier decks... where the addressable user bases are still substantial, billing mechanisms work, stores are uncluttered/edited, price points are high and recurring subscriptions endure.

Less Rush, More Rollercoaster for Digital Chocolate

Wow, what a difference a day makes...

Yesterday MobileGamesBlog reported that Trip Hawkins' mobile (and now social network) games publishing company Digital Chocolate had "secured several millions of dollars" in financing from Bridge Capital Holding and had upped their longtime studio chief Ilkka Paananen to President of the company (UPDATE: apparently Trip had announced this promotion back in February on his OMG Blog). The story indicated that this was an equity investment on top of the $43.8mil the company had received previously... which to my mind represented a meaningful market driven endorsement of the viability of the company and its prospects for growth. Big industry news for several reasons: 1) funding has hardly been flowing into the mobile games space; 2) insider buzz (driven in part by the company's recent, atypical, quietness in the press) is that Digital Chocolate has been struggling, like many of their mid-tier peers; 3) folks like and respect Paananen (founder of games studio Sumea in 1999, acquired by D'Choc in 2004) and his elevation seemed like a super-smart move to bolster management ranks and provide counter-balance to the venerable, but notoriously mavericky Hawkins as the company prepared for growth. All good stuff. After reading the story, I asked in a tweet (as I am wont to do),"at what valuation... anybody know?" and sent Paananen a congratulatory IM... to which he didn't respond.

Well the picture painted this morning in Mobile Entertainment's coverage of the story, and MobileGamesBlog's followup, may explain why I didn't hear back. Apparently the funding is actually a "multi-million dollar revolving line of credit" to be used for "general corporate purposes"... which sounds a lot more like a cash lifeline than an endorsement. To make matters worse, it now turns out that Paananen will not be taking a larger roll going forward, but instead will be leaving the company. I don't think either pieces of news, or how the messaging was managed, bodes particularly well for the company... and I suspect industry buzz may turn even more negative.

Of course this situation begs the question, what is the path forward for Digital Chocolate and the other key players in the struggling mid-tier of mobile gaming... specifically Glu Mobile, Hands-On & I-Play? I must say I'm pretty skeptical about them all piling into Facebook gaming... which is the popular strategy du jour. I have an idea that I'll share in an upcoming post.

Is Insurrection The Future of Mobile Gaming?

Mark Cuban just sent an enthusiastic tweet about Paranoid Games' location based iPhone title Insurrection, that's releasing on the App Store July 4th (check out the backstory video). I have to agree this looks pretty interesting, particularly in light of rapid smartphone consumer adoption of services like Foursquare and Gowalla... which are inherently much less fun.

However, this is hardly an original idea. 10 years ago a Swedish company called It's Alive! created and deployed a location based game called BotFighters in several European countries, that used WAP & SMS. As has been typical in this space, the It's Alive! guys were way, way ahead of their time and their company, which eventually (ironically?) merged into another called Daydream, was soon gone but not entirely forgotten.

I think Paranoid Games has the timing right, so now it comes down to execution and marketing. I wish them luck.

The Good The Bad & The Ugly In The Mobile Content Ecosystem May 2010

This segment, which covers my current perception of the state of select companies and business sectors in mobile entertainment, will be a recurring feature on Cabana Mobile. You'll notice dynamism in terms of the companies covered and where they fall within these categories, over time, as my inputs change. Let me know if you agree or disagree with my opinion... and tell me what other companies/categories you'd like to see on this list.

THE GOOD

• DeNA - Japanese powerhouse, fueled by the uber-successful Mobage-town social mobile games portal, has over $500mil in annual revenue, $125mil in profits and over $350mil in cash. These guys could roll-up several major western games publishers in a heartbeat if they were so inclined.
• Gameloft - the French publisher, always a high quality player, has been on its iPhone game from the start and now derives a full 21% of their revenues come from the AppStore... which is (for better or worse) the only game in town in terms of paid mobile content. Gameloft is proof that you can turn a super-tanker in rough seas.
• GAMEVIL - South Korean game publisher has 2 things going for it... great capabilities with micropayment model games in its home market and a focus on high-quality builds that are conducive to smartphones. These guys regularly deliver solid profits and have a market cap that must make many of their bigger competitors very envious.
• Millennial Media - It's no secret that I've always had a healthy level of skepticism about the value of the mobile ad networks. That said, there ain't no denying that the biggest, and one of the best managed, of the independents is in a super-sweet spot in light of Google's $750mil acquisition of AdMob and Apple's $275mil acquisition of much smaller Quattro. Rumors have been swirling for months that Microsoft is in the hunt.
• Firemint - smart, lean Australian games developer, turned iPhone publisher, is one of my favorite content success stories of the smartphone revolution. Flight Control and Real Racing have been true phenomena on both the iPhone & iPad. The big question is, of course... what's next?

THE BAD

• Glu Mobile - this quality mobile games publisher, that I once called the "barometer of the health of the mobile entertainment space", has been struggling to evolve from a carrier-focused, licensed IP based company, into a smartphone savvy developer of original game franchises. They're currently going through a painful right-sizing process and experiencing declining quarter over quarter revenues. Cash is a severe pain point and their market cap (under $40mil) is currently 11% of rival Gameloft's.
• Carrier Decks - remember way back when (2years ago) when Get It Now! and MEdia Mall (and their ilk) used to be like WalMart and Target for mobile content? Well unfortunately the smartphone revolution and Apple's retail smarts have shifted that paradigm... big time. Publishers now routinely report alarming declines in their carrier-based revenue. I doubt the tide will turn back, unless operators focus their efforts on curating and facilitating billing for paid Android apps... 'cause that's a growing mess they're in a position to fix.
• Motricity - back in January this veteran, Bellvue, WA based, carrier content platform management company made its intentions known to the SEC that it wanted to go public. Lots of folks in the industry were shocked by the timing, considering the the general state of the IPO market, current conditions in the carrier deck business, the very substantial losses Motricity has racked up over the last few years and the fact that 74% of its revenues come from 2 companies.

THE UGLY

• GetFugu - when your stock price is under a penny, you have to take a bridge loan for $170k & after 6 months your one app has only 333 mostly poor ratings in the AppStore, that's kinda ugly. Even the micro-cap day trader crowd is way over it. It's hard to believe that this company will survive the summer.
• NeuMedia (f/k/a Mandalay Media) - the owner of Twistbox & AMV has always had an identity crisis; is it an adult entertainment or a games company? Recent exec & board defections and a cash-balance triggered notice of default indicate to me that they may not have to struggle with this issue too much longer.
• Off-Deck Mobile Portals - before the smartphone revolution this was a red hot space, with power-players like Thumbplay, Flycell & Jamba/Jamster vending recurring ringtone & graphics subscriptions, to under-supervised kids. After paying $120 bucks over a year for those 3 Young Jeezy tones and a blingy pot leaf screensaver, most suckers (or their parents) got a clue.

THE QUESTION MARKS

• Zed - the Spanish personalization giant has been like The Borg for the last couple of years, sucking up companies left & right, and diversifying into myriad content plays... including TV production. Though privately held, they used to brag about being the biggest mobile content company in the world, claiming revenues over $800mil!... but I haven't heard a lot of bragging recently.
• Buongiorno - this Italian mobile personalization & services goliath still has revenues in the $300mil range, but their revenue has been on a downward trajectory as the company's content offerings get a little long on the tooth and it tries to figure out how to be relevant in a smartphone world.
• Index - this longtime Japanese content powerhouse, whose mobile group is perennially in my Top 5 by revenue, seems to be faltering a bit. Their one time bid to be a global player, by virtue of a North American & European buying spree, flamed out and now they're fighting to stay relevant in a home market where the iPhone and Android are gaining traction.
• Android Paid Apps - as I alluded to earlier, this is a mess. Considering how quickly Android handsets (and soon to be tablets) are proliferating across carriers, this should be a huge opportunity. However, Google's disinterest in managing their store & consumer resistance to setting up Google Checkout accounts, have really stifled Android's paid app potential. I think it'll be up to the carriers to fix this problem.
• Ovi - Considering Nokia's 2.7% marketshare in the US this won't be a factor here for a long time. In the rest of the world there's more hope, especially considering some recently promising download numbers, and the appointment of industry vet Bryan Biniak (a guy who I know understands content) to run Ovi Publish. Frankly I'm more bullish on Ovi now than anytime in the last year.
• Augmented Reality - Boy, I was really excited about this space for awhile, particularly apps like Layar... but I'm definitely not feelin' it right now. AR still seems more like a novelty than a necessity.

Pocketnow Finds Flash Slows Otherwise Fast Android 2.2 Froyo Web Browser

Google Phone With Whisper Ads

Updated Enterprise Values of 15 Public Mobile Entertainment Companies

What a difference a week makes. I'm already updating this spreadsheet with some new data. Here are some notable changes:

• Buongiorno posted Q1 2010 earnings
• Velti filed updated earnings with the SEC as part of their bid to go public on the NASDAQ (they're currently listed on LSE)... their numbers are pretty impressive (more on that soon)
• Mandalay Media, parent of Twistbox & AMV, changed its name to NeuMedia, Inc. & announced a notice of default related to a cash balance provision from a key creditor
• ROK Entertainment's stock is down over 50% today (guessing they'll be more news to follow). Btw - did y'all know the biggest shareholder in ROK is the DeJoria family, which controls the Paul Mitchell salon product empire? Always thought the guy in the ads was Paul Mitchell... but that's actually John Paul DeJoria (Mitchell was his founding partner). Anyhoo, probably hasn't been a great investment no matter how you cut & color it

Select Data From Buongiorno's Q1 2010 Earnings

Gameloft Gets Some App Store Promo Love

Wow! Gameloft got one of the six rotating feature "bricks" at the top of the iTunes App Store. That's some pretty sexy real estate for publishers trying to break through the insane clutter of Apps in the store. What's fascinating is that Gameloft elected to tag the ad with it's company name and link to their catalog of iPhone & iPad titles. Clearly they must believe (or want to test the theory) that Gameloft has become a recognizable endorser brand with consumers who buy games... and not just folks who attend MWC & CTIA. Hmm, I wonder if that's really the case. I've always considered the games business analogous to the film business with respect to marketing... wherein the emphasis is always on the title, because it's assumed that the consumer is generally agnostic about the company releasing it. What do you guys think?