EA bid sends Jamdat shares up

By Reuters

Published: December 8, 2005, 5:43 PM PST

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Electronic Arts said on Thursday it would buy Jamdat Mobile in a $680 million deal to increase EA's share of the fast-growing mobile game business.

The announcement sent Jamdat shares up nearly 19 percent.

EA, the world's biggest video game publisher, agreed to pay $27 per Jamdat share in cash and assume outstanding stock options. The companies plan to publish more than 50 games for mobile phones in the first year after the completion of the deal, which is slated to close in EA's fiscal fourth quarter ending March 2006.

EA is the dominant maker of video games for play on consoles such as Sony's PlayStation and Microsoft's Xbox. The transition to new versions of those rival machines has put a damper on game software sales.

EA Chief Financial Officer Warren Jenson said that while recently tepid game sales ticked up in North America during Thanksgiving week, sales during the first week of December were soft and below the company's expectation. EA did not alter its financial forecasts.

EA said it made the offer for Jamdat with an eye on the U.S. mobile entertainment business and designs on the flourishing mobile markets of Europe and Asia, where technology and adoption rates are ahead by leaps and bounds.

Los Angeles-based Jamdat, best known for mobile games such as "Tetris," "Bejeweled" and "Jamdat Bowling," went public in mid-2004 and gets most of its revenues from the United States.

"We think that on a combined basis, we can go very quickly, very aggressively, not only in North America, but in Europe and Asia," EA Chairman and Chief Executive Larry Probst said.

In other news:

Global revenue from games played on mobile phones reached about $1 billion in 2004 and the market is expected to double to roughly $2 billion this year, according to industry research firm Screen Digest.

Jamdat and Gameloft of France accounted for almost 30 percent of game download revenue in the United States and Europe in 2004, Screen Digest said.

Jamdat does business with most major wireless carriers. They not only distribute Jamdat's content, they also handle billing and fee collection.

Games by Jamdat cost from $3.99 to $7.49 and from $1.49 to $2.99 for a monthly subscription. Ring tones prices range from 99 cents for a single ring tone to $11.99 for a collection of them, according to regulatory filings. In its most recently reported quarter, Jamdat had revenue of $20.2 million.

EA said its one-off, acquisition-related charges are expected to total between 10 cents to 15 cents per share in the fiscal fourth quarter, when the Jamdat deal is slated to close.

Upon completion of the deal, EA and Jamdat's mobile businesses will be combined and lead by Jamdat chief executive Mitch Lasky.

EA shares closed down almost 1.5 percent to $55.75 prior to the announcement of the deal and fell further, to $54.30, following the announcement of the acquisition plan.

Jamdat shares closed up almost 2 percent to $22.77 and jumped to $27.03 in after-hours trade. Both stocks trade on the Nasdaq.

Microsoft's Xbox 360 was released on Nov. 22 in North America. Sony's PlayStation 3 is expected out in 2006.