Jamdat Dollars and Cents

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).