It appears the roller-coaster ride isn’t over for Jamdat Mobile Inc.
The wireless entertainment publisher celebrated its first full year on the Nasdaq last week, announcing third-quarter revenue that more than doubled from the year-ago period. Jamdat credited successful European launches of Tetris and Downtown Texas Hold ‘Em for pushing its quarterly profit to $1.4 million, or 6 cents a share, compared with $8,000, or less than a penny a share, last year.
Revenue more than doubled as well, from last year’s $9.5 million to $20.2 million.
Earnings generally were in line with Wall Street estimates, although Jamdat issued fourth-quarter projections on the low side of analyst forecasts. The Los Angeles-based publisher forecast revenue between $23 million and $25 million and adjusted income of 18 to 22 cents a share; analysts had projected earnings of 22 cents a share on $24.9 million in revenue.
But investors greeted the news warmly as Jamdat shares spiked 8 percent to $19.10 after the company’s earnings announcement. The gains held, and shares were trading at $19.37 on the Nasdaq late last week.
Jamdat’s first year as a publicly traded company has been volatile. The publisher raised nearly $90 million in a much-hyped initial public offering in October 2004, then watched as its stock shot up 41 percent in the first day of trading. Jamdat plummeted back to earth just six weeks later, though, its stock falling from $32.35 to $22.15 as investors savaged the company following a disappointing initial quarterly statement.
The trend has continued, to a lesser extent, with each quarterly report: Each statement is followed by a flurry of trading activity, then activity slows as investors try to find the pulse of the mobile-gaming market.
While Jamdat’s most recent jump in revenue is impressive, the latest quarter may be as notable for lost opportunities. The company said service snafus and network hiccups on the part of Verizon Wireless and other carriers may have cost the company millions.
“Q3 was a particularly challenging quarter in the U.S., as many of the major U.S. carriers undertook platform upgrades, service relaunches or modifications in the quarter,” Mitch Lasky, Jamdat’s chief executive officer, said during an earnings call. “Throughout the year, particularly with what happened with Verizon, (glitches) probably cost us $3 million or more.”
Lasky said game subscriptions were not automatically transferred as Verizon Wireless users upgraded handsets. The problem, which Lasky said Verizon Wireless has since addressed, impacted Jamdat’s third quarter more than any other period.
But it’s unclear whether network upgrades and other issues will continue to plague Jamdat and other content providers, according to Albert Lin, director of research for American Technology Research.
“The problem I see is these kinds of updates generally work against companies like Jamdat,” Lin said. “Even though Verizon just went through a pretty major tweaking of their system, there will be so many tweaks they will be considered an ongoing event.”
Lasky said he’s hopeful that U.S. carriers have completed most such upgrades, and said early fourth-quarter results indicate the market is “back on the upswing.” Jamdat hopes to build on the success of its Tetris franchise, which it acquired in the $137 million buyout of Blue Lava Wireless earlier this year.
Tetris generated $6.7 million in sales during the period, accounting for one-third of the company’s total revenue for the period; the hit title Bejeweled accounted for 14 percent of overall sales. The publisher plans a series of new Tetris titles, including Tetris Bling and Tetris Battle, and said it will continue to exploit new technologies for multiplayer gaming, location-based play and other offerings.
Jamdat continued to build on its domestic carrier relationships during the quarter, drastically increasing revenue from Cingular Wireless L.L.C. and Sprint Nextel Corp. subscribers. But Jamdat continues to lean on Verizon Wireless subscribers, who ponied up 30 percent of the publisher’s revenue during the quarter.
Despite its lackluster guidance for the current quarter, Jamdat recently released two highly anticipated titles-Socom: U.S. Navy SEALs Mobile Recon and Doom RPG-as part of its holiday push. The offerings have received solid reviews, but Lin warned that it would take more than just good games for Jamdat to continue to pace the market among wireless game makers. As the increase in off-deck activity increases, Jamdat must carefully balance its carrier relationships with the need to present a consumer-facing brand. And it must do so as it continues to churn out games that take advantage of ever-evolving technology.
“They are doing well in a very volatile space,” said Lin, “but the business model trends and the amount of competition in the marketplace are likely to work against them over time. … The problem I see with this model is that there are more ways of getting quality content coming to the marketplace than ever before.”
The publisher said it’s working to establish name recognition among wireless users. For example, it partnered with McDonald’s Corp. to give away titles in a sweepstakes and teamed with RadioShack Corp. to offer mobile games through the chain’s brick-and-mortar locations. But solid relationships with operators and premium deck placement will also be crucial for the foreseeable future, said Minard Hamilton, the company’s executive vice president of distribution and marketing.
“From our perspective, deck placement will always matter,” Hamilton said.
