March 12 - Candy Crush Saga maker King Digital Entertainment rides the tech wave with a planned IPO and a hefty valuation as it gets set to go public. Is Candy Crush the real deal or just a passing sugar rush? Lily Jamali reports.
The maker of Candy Crush Saga is gearing up for a sugar rush. Two weeks ahead of its IPO, King Digital Entertainment estimates it is worth as much as $7.6 billion. Not worth as much as Electronic Arts, but valued more than Groupon and Zynga. Analyst Christopher Baggini says investors in digital gaming have played this game before. SOUNDBITE: CHRISTOPHER BAGGINI, SENIOR INVESTMENT MANAGER, TURNER INVESTMENT PARTNERS, (ENGLISH) SAYING: "The biggest fear is that it's a boom-bust scenario. The game will do very well for a couple of months and then fade, and whether or not there will be something there to replace it. So that's where all the questions will lead. We'll start with the top line." Memories of another mobile gamer, Zynga, loom large. The maker of FarmVille went public two years ago. Today, Zynga trades at half that $10 opening price, although now... SOUNDBITE: CHRISTOPHER BAGGINI, SENIOR INVESTMENT MANAGER, TURNER INVESTMENT PARTNERS, (ENGLISH) SAYING: "They're actually now rebounding as far as credibility on the street. You've seen the stock do very well lately. They've got multiple products they made in acquisition which we think is actually quite good." King's sweet spot? 2013's fourth quarter revenues topped $602 million. Candy Crush, however, accounts for three-quarters of that revenue. The games been downloaded over half a billion times since its 2012 launch... and is free.. though some players pay for add-ons and extra lives. But the popularity of Candy Crush has already started to wane. Analyst Josef Schuster says King's plans for the IPO cash may quell worries that it's a one-hit-wonder: SOUNDBITE: JOSEF SCHUSTER, FOUNDER, IPOX SCHUSTER (ENGLISH) SAYING: "About 60-70% of the proceeds will flow into the company to grow the company and obviously that's where the focus of the company is going to be - to create more hits, potentially more games, to flood the market with as many games as possible to land at least 1 or 2 more hits like candy crush going forward." As for that whopping $7.6 billion valuation - Schuster says it might actually be slightly "low" - thanks in part to tough lessons learned from Zynga. SOUNDBITE: JOSEF SCHUSTER, FOUNDER, IPOX SCHUSTER (ENGLISH) SAYING: "We believe the investment bankers obviously want to leave a good taste in investors mouths by underpricing the deal slightly." The IPO takes place March 26 - and companies said to be considering IPOs of their own - including Spotify and Square - are likely to be watching.