$GIGM Nearing 52 Week Low.
The company has forged key relationships with well known companies in the gaming and cloud industries and has hired top-of-the-line talent to help drive accelerated growth.
$GIGM plans to launch new games in the second half of 2014 following the successful launch of its Three Kingdoms Partner game, and plans to expand its cloud offerings.
At 99c and with $1.33/share cash, GIGM has better growth prospects than in 2008 when it traded North of $20.
GigaMedia Ltd. (NASDAQ:GIGM) is a holding company with a diversified portfolio of businesses providing online games and cloud computing services.
GigaMedia's online games business develops and operates a suite of games in Taiwan and Hong Kong, with focus on extending the company's online games platform to Web/mobile games, the fastest growing segment of online games, and supporting cross-platform play with strong self-development capabilities.
The company's cloud computing business is focused on providing businesses in Greater China and other regions of South East Asia with critical communications services and IT solutions that increase flexibility, efficiency and competitiveness.
Cash-rich GigaMedia Ltd. has been quietly executing an aggressive multi-pronged turnaround that started in 2013 focusing on fast-growth browser/mobile games and cloud-based applications and products aimed initially to small-to-medium business and ultimately extending them to enterprise applications. Company management believes that this will result in a leaner business and will position the company to deliver sustainable growth and profitability in 2014 and beyond.
Commenting on the company's most recent quarterly results GIGM CEO Collin Hwang summarized the progress made thus far, and the opportunities ahead, as follows:
2014 Strategic Initiatives Overview
Online Games
Strategic focus - Management continues to execute its plan to rebuild and grow the online games business. Central to this strategy has been a sharp focus on strategic alliances and building a strong pipeline of browser/mobile games and social casino games. Management is now beginning to execute plans to vertically integrate -- to strengthen the company's development, distribution, and operations of games and services -- and to scale up.
Browser/Mobile games -- During the first half of 2014, GigaMedia enhanced its game portfolio by licensing several titles. GigaMedia successfully launched one mobile game in March 2014 (Three Kingdoms Partner) and plans to launch two additional mobile games this year licensed from third parties. GigaMedia plans to launch the browser-based MMO KingsRoad by the fourth quarter of 2014. Separately, initiatives are underway to create new revenue streams from game licensing and royalties related to intellectual property owned by GigaMedia. The company is currently finalizing development contracts for several games that GigaMedia plans to operate in Taiwan and Hong Kong and license to third parties for operation in other markets.
Social casino games -- During the first half of 2014, GigaMedia partnered with two leading international operators of social casino games to offer their games on GigaMedia's new social casino platforms. GigaMedia expects to launch its platforms in Taiwan and China in the second half of 2014.
Strategic partnership - In line with GigaMedia's plans to strengthen its ability to create and deliver top quality entertainment, build strong competitive advantages, and drive significant long-term growth, in June GigaMedia entered a strategic partnership with Gamania Digital Entertainment Co. Ltd. (Gamania) by way of a strategic investment in the company (GIGM purchased 15M shares or a 9.5% stake in Gamania). The partnership's objective is to create and grow business and shareholder value by leveraging the proven skills and vast resources of the combined teams.
CEO Hwang added,
"In online games we are continuing to make rapid progress improving our product pipeline and have scheduled multiple product launches in the medium term. We expect to launch two new licensed mobile games in the second half of 2014 and several more after that, including games that we are developing and plan to license to other operators."
"In addition, in the second half of 2014 we plan launches of two new self-developed social casino platforms that will offer unique customization features and a broad lineup of games from some of the world's leaders in social casino games. During this time, we will also be testing our new in-house developed social mobile game platform."
"We continue to see potential upside from strategic transactions. To drive future growth, during the second quarter we entered a strategic partnership with Gamania by way of a strategic investment in the company. Gamania is one of Taiwan's leading online game companies. Under the partnership, we will explore synergies and strategic cooperation in regional markets."
Cloud Computing
Strategic focus - Growth initiatives in cloud computing are focused on strengthening distribution capabilities and expanding GigaMedia's portfolio with innovative, differentiated solutions to become a total solutions provider.
New software-as-a-service (SAAS) products and partnerships - GigaMedia launched a new virtual desktop product in May -- the first product of its kind in Taiwan, and will bundle the product with hardware providers going forward. GigaMedia is currently finalizing plans with a partner to launch a new service in the third quarter of 2014 that targets technology businesses of all sizes.
New IaaS services -- During the first half of 2014, GigaMedia began providing IaaS services, including the build-out of IT infrastructure and a data center for local city transit systems.
New client services -- Initiatives are underway to build new client services. Initial focus is on providing back-end, cloud-based services for kiosks that help businesses manage services such as ticketing.
"In cloud computing, we are moving toward becoming a full-service provider, adding new products and services and partnering with tech leaders to leverage their large customer bases," stated CEO Collin Hwang. "In 3Q we are bundling our virtual desktop with Hewlett-Packard and plan to bundle with another hardware provider soon; going forward we will also be providing new IaaS services supporting IT infrastructure and data center development projects."
I would like to elaborate on some of the key developments mentioned by CEO Hwang above:
Regarding the strategic partnership and investment in Gamania, the synergism between the two companies is remarkable and is likely to kick Gigamedia into overdrive. Since 1995, Gamania has strived to bring the most enriching game experiences to players around the world. Gamania is a growing and profitable gaming enterprise. Gamania had revenues of $275 in 2013 and has paid a 0.5 NT/share dividend on September 17, 2014 to shareholders on record as of August 26, 2014. This means that GIGM will receive a dividend of about $250,000 for the 15 million Gamania shares it owns. More importantly the company plans to use Gamania's know-how and influence to create and deliver top quality entertainment, build strong competitive advantages, and drive significant long-term growth.
To kickstart GigaCloud, GIGM has formed strategic partnerships with Taiwan-based Chailease Holding Co Ltd. and with France-based Atos with 2013 annual revenue of € 8.6 billion and 76,300 employees in 52 countries. The Chailease partnership will allow the company to capitalize on the firm's large SME customer base. Chailease is Taiwan's number one leasing company with approximately 42 percent market share. The firm has a wide product offering, including financial services, leasing, and installment sales and serves approximately 15,000 SMEs in Greater China. The Atos partnership provides services with bank-grade security and will help promote Gigamedia's business, extend its reach, and expand its product portfolio. Atos is a global leader in cloud computing. GIGM added a new CEO for the division, formerly from Atos, with an impressive record of developing new cloud businesses and driving growth. Mr. Simon Lee helped develop and grow the Taiwan branch of Atos from 2006 to 2013. During this time, Mr. Lee served in different key roles, including managing director, vice president of sales, and sales director. At Atos Taiwan, he spearheaded penetration of the telecom, warehouse, and government sectors, surpassing double-digit sales goals every year.
Similarly, to help the Games Division gain momentum and run efficiently, the company implemented strategic restructuring and productivity initiatives to improve growth prospects and create a business model with leverage; divided games operations into three units - social casino, mobile platform and licensed games. The company added new talent to these teams, including new directors of our mobile games and social casino games, as well as a new chief operating officer; reduced personnel from approximately 300 to 250; acquired mobile game technology and expertise via acquisition of majority interest in Taiwanese mobile game developer RingerRockz; developed a new, integrated internal game development/testing environment to better identify and resolve game issues and drive efficiencies; began transitioning from an on-premises server system to a "virtual" cloud-based system to lower operating costs and increase the stability of game operations. On April 10, 2014 GIGM announced that games industry veteran Dane Wu has joined the company as chief strategy officer of its online games business. He most recently served as the president and chief executive officer of C&C Media, the Tokyo operations of China's games leader Perfect World. Prior to that, he served as the general manager of the licensing division of Perfect World, where he developed a global licensing network of over 50 companies in 30 different countries, built the world's first and largest B2B customer support system for online games, and executed global alliances and promotions that drove growth.
On June 5, 2014, GIGM announced that it has secured exclusive license rights from Rumble Entertainment, Inc. to offer and operate their acclaimed next-generation browser action/role-playing game, KingsRoad. Commenting on the deal, CEO Hwang stated: "KingsRoad is an innovative, brilliant blend of the real flavor of console games with the simplicity and convenience of browser play. This is a gaming experience that hasn't been seen before. "Triple-A quality, exciting MMO action, with low cost and no installation required is also a great fit with our markets. Our markets are rapidly transitioning from PC-based gaming to browser and mobile gaming, creating new opportunities. No one is more thoughtful about market changes and opportunities than Rumble - we are thrilled with their game and delighted to partner with them." Jim Squires commented on a KingsRoad review: "As you've probably guessed from my gushing, KingsRoad is one hell of a game. Not only is it brilliant fun on its own merits, but it sets a new bar for what can be expected on Facebook. Rumble Entertainment has crafted a beautiful dungeon crawler with all of the trimmings, and playing with other players in real time couldn't be easier or more satisfying. If you're a fan of Diablo or Torchlight, KingsRoad is your new addiction, hands down. Full-fledged gaming has finally come to Facebook. GigaMedia plans to launch the browser-based MMO KingsRoad by the fourth quarter of 2014.
On Mar 6, 2014, GIGM released the mobile strategy card game Three Kingdoms Partner for Android devices. The game launch was the first of several initiatives planned for 2014 to expand GigaMedia's online game business with new mobile/browser games and social casino games. The game was published by GIGA's Gaminfinity Publishing Co Ltd. One interesting fact is that John Chiang, Special Assistant to the COO of Gaminfinity worked for Gamania from 2008 to 2011. I am sure that he will be a key player in the GIGM-Gamania partnership. GIGA's online games business accounted for approximately 29 percent of total game revenues in the second quarter, up from 9 percent in the prior quarter, with contributions from the company's new mobile game Three Kingdoms Partner more than offsetting lower revenues from the MMO game Tales Runner and from legacy PC games. The Three Kingdom's Partner game has accumulated rave reviews and has almost half a million installs since its launch.
