Mobile Gaming Market Sees Opportunity for Major Growth as Number of Smartphones Expected to Reach 2 Billion by 2015

  The traditional gaming market has experienced a steady decline in sales in 2012 as gaming on smartphones and tablets continues to explode. Research firm NPD Group recently reported that retail sales of video-game hardware, software and accessories had declined for the 10th consecutive month, with a 24 percent drop in September. Five Star Equities examines the outlook for companies in the Technology Sector and provides equity research on Glu Mobile Inc. (NASDAQ: GLUU) and Zynga Inc. (NASDAQ: ZNGA).

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While traditional game sales have experienced a major decline in 2012, mobile gaming has experienced the opposite. The NPD Group has reported that digital game sales -- which includes social games, mobile apps, and digital downloads -- increased by 17 percent in the second quarter of 2012. The number of smartphones in use in the third quarter of 2012 totaled 1.03 billion, a 47 percent increase from third quarter 2011. By 2015, that number is predicted to double to 2 billion.

"It's clear that the quality of mobile games is improving with faster processors and better displays on smart phones and tablets," said Michael Pachter, managing director of Wedbush Securities. "This has caused a migration of gamers at the more casual end of the spectrum away from dedicated consoles and handhelds toward mobile phones and tablets."

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Glu Mobile recently announced that Probability PLC, the UK's only publicly-traded mobile gambling company, will use the company's existing games to create Glu branded mobile slot games. Drew Crum, analyst at Stifel Nicolaus, last week initiated coverage on the company with a "buy" rating and a price target of $5.00.

Zynga recently partnered with Honda Motors to launch its first reward-based mobile advertising program. Players of "Words with Friends" and "Scramble with Friends" will earn extra tokens and in-game currency by finding Honda-related words. "Reward-based advertising is a concept we leverage with tremendous success in our web games, so we are thrilled to offer our first-ever mobile reward advertising program to promote the all-new 2013 Honda Accord," said Julie Shumaker, VP of Global Brand Sales.

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