In a bid to bolster its mobile game portfolio, Take-Two Interactive Software (TTWO) bought privately held Social Point in January 2017. According to the company’s Form 10-K, it acquired Social Point “for $175 million in cash and the issuance of 1,480,168 shares of Take-Two common stock, plus potential earn-out consideration of up to an aggregate of $25.9 million in cash and shares of Take-Two common stock.” The acquisition may drive the company’s top-line revenue.
The graph above shows Take-Two’s net revenue growth over the last five years. During the period, it has fallen at a compound annual rate of 10%.
What’s driving the mobile game market?
A proliferation of smartphones and higher data speeds thanks to the launch of 4G technology has encouraged users to play online games. By targeting these customers, Take-Two may generate incremental revenue. Moreover, improving global economies and growing game markets in China, Japan, and South Korea may further drive the company’s mobile game business going forward.
Social Point has already gained popularity in the video game market with its two most successful games, Dragon City and Monster Legends. Social Point has an exciting pipeline of games that are expected to be released in the next two years. Take-Two’s strong partnerships with Sony (SNE), Microsoft (MSFT), Nintendo, and the NBA[1.National Basketball Association] may also boost revenue going forward.