It was a remarkable coming-out party for Jamdat Mobile Inc.
The mobile-game developer raised $88.8 million in its initial public offering, then watched as its stock soared 41 percent Wednesday, the first day of trading.
Jamdat had filed for an offering of 5.31 million shares in the estimated price range of $13 to $15 per share. Instead, the IPO ended up pricing 5.55 million shares at $16 each.
The Nasdaq-listed stock finished at $22.51 Wednesday, then continued climbing, closing at $27 Friday, and placing Jamdat’s value at more than $400 million. Analysts say the successful IPO—the first ever for a publisher exclusively of mobile games—is a clear sign that mobile gaming has arrived as a viable business model.
“I think it has gone better than any other wireless IPO this year,” said Dave Mock, author of “Tapping into Wireless.” “The shares were priced above the estimated range, more shares were sold (than estimated), and they completely fulfilled their allotment.”
Best known for the bowling titles that generate 25 percent of its revenue, Jamdat distributes games through 79 wireless carriers in 39 countries. Games typically cost $4 to $7.50 to purchase or $1.50 to $3 a month for subscriptions.
The 4-year-old company turned a $1 million profit in the first six months of 2004 after losing $7 million last year.
“There’s tremendous growth in global gaming,” said Rajeev Chand of Rutberg & Co., a San Francisco-based investment bank. “Users want it—it’s something that’s clearly driving the mobile-data market.”
Analyst firm In-Stat/MDR predicts U.S. revenues from games will more than double from $91.3 million in 2003 to $203.8 million this year. By 2009, wireless games are expected to generate $1.8 billion annually—4.4 percent of wireless data revenues.
And investors are taking notice, pouring tens of millions of dollars into the industry. During the past few months, Jamdat competitors Digital Chocolate, In-Fusio, Mforma and Sorrent have raised significant funds from venture capitalists.
Meanwhile, veteran game makers have jumped into the mobile segment. After watching from the sidelines earlier this year, both Activision and Electronic Arts recently announced they’d develop games for wireless users.
“There is still a long way to go in the evolution of mobile gaming as technologies advance and as consumer tastes become clear, and EA looks forward to being a part of this evolution,” EA Senior Vice President Gerhard Florin said last month.
Game developers are beginning to realize that the handset gaming experience is different from a console experience. Mobile games must be able to be quickly picked up and put down and probably won’t engross a gamer the way a console or PC game can. Taking a console game, then, and simply putting it on a phone can be a recipe for disaster, said Mike Yuen, director of BREW developer relations for Qualcomm Inc.’s Internet Services.
“It’s unlike the traditional PC market,” said Yuen. “There, it’s all about the hardcore gamer. But the cell-phone market is broader by definition, because everyone carries a phone. You’ve got to address both” the avid gamer and the casual user.
As rosy as the picture seems to be, though, analysts agree the next year likely will be turbulent as the industry faces some much-needed consolidation. With their financial resources, industry relationships and licensing agreements, the bigger firms probably will end up swallowing smaller developers or simply crowding them out of the market.
“Certainly, it’s in the long-range plans of a lot of these players to grow,” said Mock, “and some of them may be holding out looking at partnering with a big gaming player.”
EA, for instance, is working with Digital Bridges, a London-based game maker with four years of mobile experience. But smaller companies that don’t align themselves with a big name may join forces with competitors to survive.
Regardless of pending consolidation, there’s little doubt that Jamdat’s IPO is a harbinger of an exploding industry. “This has been a real rejuvenation for wireless,” said Chand. “This is a breath of fresh air for the industry.”
