Gameloft (GLOFF)

QUOTE AND NEWS
Forbes  Jul 22  Comment 
Last week, Gameloft held a contest for its fans, offering the winners a free, full copy of Modern Combat 5: Blackout, due for release this Thursday.
Cellular News  Jun 8  Comment 
Games developer, Gameloft says that it has teamed up with Marvel to announce the development of a new smartphone and tablet title, Spider-Man: Unlimited. Click here for more.
TechCrunch  Mar 17  Comment 
E-sports startup Twitch has spent the last few years building tools that will let developers build live streaming into their games on multiple platforms. After reaching the major gaming consoles, it’s now ready to go mobile, by partnering with...
The Hindu Business Line  Mar 10  Comment 
Gameloft, a global publisher of digital and social games, has partnered with Idea Cellular to offer quality gaming to more than 130 million subscribers of the country’s third largest telecom opera...
TechCrunch  Jun 6  Comment 
Tango, a mobile messaging and video calling app with now over 120 million members worldwide, is expanding its service by opening its platform to third-party developers. By integrating the newly launched Tango software development kit (SDK) into...
Forbes  May 13  Comment 
Game publisher and developer Gameloft has thrown its support behind the new Samsung Galaxy S4 smartphone. The game maker has been active across all mobile platforms and was a primary backer for Apple’s launches of iPhone and iPad, as well as new...
Forbes  Mar 31  Comment 
CCGs have swarmed to the mobile and digital spaces, and Gameloft’s Order & Chaos Duels (iOS, Android) is looking to lay anchor in a sea of new titles.  The launch experience is a polished one, with the game borrowing its primary elements from a...
The Hindu Business Line  Jan 30  Comment 
The Andhra Pradesh Government is looking into the closure of Gameloft Software’s India division here, leaving 250 employees jobless. The French firm, which develops and publishes video g...
Forbes  Nov 29  Comment 
Heroes of Order & Chaos is Gameloft’s frontier exploration into the world of the mobile MOBA (And before Dota acolytes begin bristling at the usage of the MOBA designation, it’s being used here because that is the term Gameloft has chosen to...




 
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Company Profile

GameLoft was created in late 1999 and specializes in developing and publishing video games for mobile phones. It is the European no.1 in its segment and the world no.2 behind EA Mobile. Its activity is based on Java, Brew and Symbian technology. Gameloft wants to turn your cell phone into a storage space for fun. The company publishes and develops downloadable video games for wireless phones. The company has also created games for Nintendo DS, and the Apple iPod. The company's phone-based games are available in 70 countries, distributed through telecom operators, ringtone and logo portals, phone manufacturers, and retail outlets. Some 94% of its revenues is generated from game downloads and the rest between OEM and others (DS, iPod, PC, Xbox Live Arcade). Gameloft’s catalogue includes games operated under licence via partnership agreements with companies such as Ubisoft Entertainment, as well as games that it owns and operates itself. The group has close to 4,000 employees (of which 3,400 developers) and distributes its games in 80 countries throughout the world. It generates 44% of its revenues in Europe, 34% in the USA and 22% in the rest of the world.

Industry View

The video games industry has expanded faster over the last few years, accompanied by major consolidation (the takeover of Activision by Vivendi Games, Electronic Arts’ hostile bid for Take-Two, etc.). According to Forrester Research, 21% of all North American and 19% of European consumers play games regularly. Younger consumers tend to play more video games, with 77% of North American males and 40% of females aged 16 to 24 playing games, compared to 45% of males and 22% of females aged 35 to 39, according to Forrester. Video game software sales are expected to increase at a compound annual growth rate (CAGR) of 6.6% from 2004 through 2010, according to IDC, while video game hardware is expected to grow 11.6%. Industry sales remained weak in 2006 as the next-generation X-Box 360 continued to build its installed base (estimated at 10.8 million at the end of 2006) and reflecting the launch of PlayStation 3 and Nintendo Wii. We believe the key driver for future sales will be the adoption rate of next generation consoles, which IDC expects to reach 129.9 million by 2010, a CAGR of 65% from 2006 through 2010.

Wireless Gaming Market Offers Bright Prospects

The wireless gaming market is driven by five factors: 1. The total handset base installed worldwide, currently more than 2bn, may reach 4bn in 2010. Gameloft is able to adapt its games to more than 1,000 different handsets. 2. Third-generation GPRS and UMTS networks do not need to be installed to download a mobile game. However, handsets must be equipped with the Java/Brew technologies. At least 60% of the 2bn handsets worldwide are now equipped with such technologies, compared to 1bn in 2006, and this number is likely to rise to 95% by the end of 2008 (source: ARC research), hence the strong upside in terms of potential customers. 3. Mobile games developers have also entered high-growth areas such as the Chinese market, where there is a huge number of potential players. Gameloft is well ahead of its competitors in these areas. 4. Gameloft is trying to expand its games to other platforms. It recently signed a deal with Apple to develop games for its fifth generation iPod platform. While the 2007 contribution from iPod games may still be negligible, it offers a tremendous new customer base in the future. 5. Mobile Games Have Wider Appeal Than “Old” Video Games - Mobile games have reached a wide range of customers with the help of “casual” games which account for more than 50% of Gameloft’s 2007 turnover. Overall, the wireless gaming market has bright prospects, which Gameloft is bound to benefit from.

Image:Video game software market by platform in the US,, Japan & Europe zone (in Euro bn).PNG

Source: IDATE, January 2008

Gameloft Q1 2008 Performance & Outlook

Q1 sales rose 11% or 19% at constant exchange rates to €25.3m, in line with the conservative forecast of €25.5m. Performance in the US was particularly weak, with revenues down 7% at constant exchange rates. Gameloft thus starts the year significantly behind its full-year sales growth target (20-25% at current exchange rates to €120m-125m), meaning that consensus expectations for 2008 (and 2009) are at risk, in terms of both revenues and margins. Management is looking for 2008 operating margin before stock options of between 10% and 15%.

H2 Visibility a concern

The group has started the year significantly behind its full-year sales target (€120m-125m), especially as it has already said it does not expect a real impact from new handsets and platforms (iPhone, N-gage) in Q2. This means that meeting guidance will mainly depend on H2, which, while it will benefit from a favorable base effect in Q4 (driven by the iPhone, Ovi/N-Gage, Android and Zune), nevertheless offers little visibility on the extent of a recovery in growth. The other positive news for the moment is that headcount has fallen as expected, with the announced sale of the Indian studio reducing the workforce to 3,800 at end April (vs 4,000 at end 2007). Margins should therefore be under control, even in a more difficult than expected climate for the top line. Apart from the risk to 2008 guidance, another noteworthy aspect is the already high consensus expectations for 2009 (growth of more than 20% and estimated margin of 15%-18%). If Gameloft falls behind target in 2008, it will be hard for it to meet consensus expectations for 2009, particularly in terms of profitability.

Gameloft Strengths

• Biggest in-house development team in the world (3,400 developers) of which 90% in low -cost countries • Enjoys high barriers to entry (porting costs) • Extensive and comprehensive games catalogue (200 games), not dependent on any one title • Largest distribution network in the industry (agreements with 180 telecom operators across 80 countries) • Capacity to create recurring franchises • Flexible and quick to adapt to new mobile phone models • Sector consolidation (games publishers, media groups). Gameloft could be an attractive target for a large consoles or media company

Gameloft Weakness

• Competition from games publishers positioned in casual consoles (Wii, DS, PSP). • Games prices and downloading costs set by telecom operators could soar. • Higher costs for R&D (3D, etc.), porting and licenses. • Sales slowdown on multimedia mobile phones. • Revenues exposed to the currency risk.


Barriers to entry

The main barrier to entry for games on mobile telephones is the plethora of mobile telephone models existing in the market. While the standards used are often the same (Java, Brew, Symbian), screen size, keypad types, processors, etc. differ from one hardware manufacturer to the next and from one region to another. Accordingly, publishers have to be quite flexible in order to supply their games to the maximum number of different models (parallel management of different versions). Therefore, the greatest expense lies not in creating a mobile telephone video game (€200,000e on average), but in porting the game (€300,000e on average) to adapt it to around 1,000 different types of telephone).

Image:Video game development costs in relation to platforms.PNG

Source: IDATE

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