Electronic Arts to Buy Jamdat For Role in Mobile-Games Field
Staff Reporter of THE WALL STREET JOURNAL
December 9, 2005
In a major endorsement for the fastest-growing portion of the videogames industry, Electronic Arts Inc. agreed to acquire Jamdat Mobile Inc., a leading publisher of games for wireless phones, for $680 million in cash.
The deal, the largest ever for EA, of Redwood City, Calif., highlights the swift growth of mobile gaming. Mobile gaming has taken off in recent years as more sophisticated handsets with color screens became commonplace and faster wireless networks gave publishers a practical way to download games.
Revenue from mobile games in the U.S. is still relatively small compared with that from PC and video consoles, EA's mainstay businesses. But growth in the market is outpacing these two categories. This year U.S. mobile-game revenues are expected to more than double, reaching about $567 million, estimates PricewaterhouseCoopers LLP. About 11% of mobile-phone users in the U.S. say they regularly download games onto their mobile phones, according to a survey by Telephia, a research firm that studies the wireless market.
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Larry Probst, EA's chief executive, predicted mobile games will be an important contributor to EA's growth. "We like to lead in whatever business we involve ourselves in," Mr. Probst said in an interview. "We think (Jamdat) can help us grow faster in this area."
Mitch Lasky, CEO of Los Angeles-based Jamdat, will lead EA's mobile games business after the deal is completed in March.
EA's decision to acquire Jamdat, best known for cellphone versions of games like Tetris, Bejeweled and Jamdat Bowling, also underscores the challenges established publishers have had getting a big share of the mobile-games market. EA, the world's leading publisher of videogames, has a mobile-games division that publishes cellphone versions of games such as Madden football, but the group has lagged behind Jamdat and others.
Greg Ballard, CEO of Glu Mobile Inc., a Jamdat competitor, said large publishers have underestimated the complexity of the mobile-games market. Although the graphics of mobile games are often primitive compared to console and PC games, mobile publishers have to ensure the titles work on a much larger number of devices. Mr. Ballard, for one, says Glu must test games on over 200 models of phones.
EA's acquisition of Jamdat "may be a signal to everyone watching that even the world's largest games company couldn't do this on their own," he said.
Jamdat has been a beacon of sorts for the mobile-games industry. After the company filed for an initial public offering of stock in June 2004, venture capital flooded into the market. As a result, industry executives and analysts say the sector could now see a wave of consolidation.
The Jamdat deal is a large one for the games industry. Outright acquisitions of sizable publishers are rare, in part because licensing deals for popular entertainment and sports brands often can't be transferred to a new corporate owner. Jamdat's Mr. Lasky said EA will be able to assume control of "virtually all" of Jamdat's licenses, including those for two of its most popular games, Tetris and Bejeweled.
EA anticipates the acquisition will result in a charge to earnings of between 10 cents and 15 cents a share in the company's fiscal fourth quarter, which ends in March.
Write to Nick Wingfield at nick.wingfield@wsj.com5
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