Ricky Sandler Talks About Investing In The Gaming Industry

Ricky Sandler, founder of Eminence Capital, was on Wall Street Week on Sunday, and talked about investing in the gaming industry.

Zynga & Mobile Gaming

The hedge fund manager first went into Zynga Inc ZNGA, which he says “was sort of a hot IPO a few years ago.” He adds that games like Farmville, and Words With Friends were particularly popular on PCs, on the Facebook Inc FB platform. However, he continued, “when the world shifted to mobile, they missed it.”

Sandler notes 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 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 concludes.

The Gaming Industry

Regarding the gaming industry as a whole, Sandler assures Eminence Capital is “pretty excited.” In fact, he states that it’s one in which the firm’s been accumulating positions. On top of owning a lot of Zynga, the hedge fund has been buying Activision Blizzard, Inc. ATVI, Take-Two Interactive Software, Inc. TTWO and a European company named Ubisoft Entertainment SA UBI.

The manager goes on to explicate that, “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.