Courtesy of Benzinga.
Ricky Sandler, founder of Eminence Capital, was on Wall Street Week on Sunday, and talked about investing in the gaming industry.
Zynga And Mobile Gaming
The hedge fund manager first went into Zynga Inc (NASDAQ: ZNGA), which he said “was sort of a hot IPO a few years ago.” He added that games like Farmville and Words With Friends were particularly popular on PCs on the Facebook Inc (NASDAQ: FB) platform. However, he continued, “when the world shifted to mobile, they missed it.”
Sandler noted that the shares went public at $12, but fell below $2.50. So, he sees “a business where, long term, there’s significant growth in gaming, significant growth in mobile gaming. As the world goes to 2 to 3 billion smartphones, Zynga has some really really great franchises, some great games in development, and, they have transitioned their business now.
“It’s gone from 35 percent mobile to 70 percent mobile. And, so, we think they are really well positioned to capitalize on where the world is going now,” he concluded.
The Gaming Industry
Regarding the gaming industry as a whole, Sandler assured that Eminence Capital is “pretty excited.” In fact, he stated that it’s one in which the firm has been accumulating positions. On top of owning a lot of Zynga, the hedge fund has been buying Activision Blizzard, Inc. (NASDAQ: ATVI), Take-Two Interactive Software, Inc. (NASDAQ: TTWO) and a European company named Ubisoft Entertainment SA, which trades on the EPA exchange under UBI.
The manager explicated, “What’s really happening to the gaming industry is, now that publishers are no longer selling a $50 packaged piece of software, but they are delivering you a game directly online, even if you are playing on an Xbox, there are three new things that are making this business significantly better.”
The most relevant one seems to be “the direct relationship with the consumer allows you to extend title lifecycle,” to sell an upgrade package instead of a new version of the game.
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