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Jamdat Dollars and Cents

Posted on Thursday, Dec 8th 2005

Electronic Arts, the largest PC games producer has just announced that it will acquire Jamdat, the leader in Mobile games for $680 Million.

Big price tag, endorsing the fastest growing segment of the gaming industry.

Jamdat’s revenue run rate will probably be about $75-$85 Million this year, assessing from their $54.6 Million cumulative revenues for the 3 quarters YTD. The premium that the market places on the deal is entirely due to strong growth rates (36-month growth rate of 240%; 12-month growth rate of 120%). In comparison, Electronic Arts has a 12-month growth rate of a meagre 5.8%.

Jamdat’s margins, however, are thin. Mobile game production is a very expensive process, with QA cycles that require testing on zillions of platforms. This is where, Vivek Paul, former Wipro chief who has joined EA’s broad this year, could add a lot of value. While it is very difficult to create original content for the US / European markets from India, testing for platform compatibility is a no-brainer for off-shoring economics.

Jamdat (JMDT) went public about a year back, in October 2004. Amongst last year’s IPO’s, another prime acquisition candidate is Blue Nile (NILE).

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