DeNA shares rally 8.4% as company forecasts rebound in virtual currency revenue

By Kathleen De Vere Comment

Mobage operator DeNA said its net sales increased 16 percent year-over-year in its third quarter, rising to 34.2 billion yen ($448 million). While sales rose, net income declined by 25 percent over last year’s results, dropping from 8.1 billion yen ($106 million) to 6.08 billion yen ($79.2 million).

Despite the decline in net income, shares rallied on the news climbing 8.4 percent to to 2,485 yen ($32.31), giving the company a market capitalization of $4.8 billion.

It looks like shares rebounded because DeNA is predicting that operating income will rebound in the fourth quarter and rise to a record high of 16.7 billion yen ($217.5 million). Sales of the company’s in-game currency Moba-coins have also rebounded, hitting an all-time high earlier this month. The company is forecasting its net sales for the fiscal year will hit 144 billion yen ($1.8 billion) and a net income of 32.6 billion yen ($424 million). DeNA also announced plans to spend up to 10 billion yen ($130 million) on a stock repurchase.

The results mean that rival GREE is still ahead of DeNA in terms of both sales and net income. Earlier this month GREE reported net sales of 41.5 billion yen ($545.3 million) and net income of 12.7 billion yen ($165 million) for the same period.

While GREE’s gains have largely come from sales of paid services like avatar customization and advertising, DeNA’s growth in that area has stalled.  DeNA’s sales of advertising, avatar goods and game related sales on the Mobage network all dropped between the second and third quarters. While the company’s sales are up year-over-year it is the second quarter in a row that the overall sales have declined.

DeNA also reported its expenses were up 61 percent year-over-year, with increases in labor costs, outsourcing and commissions all increasing significantly due to its continued focus on international expansion. The company will be launching a new Korean platform this quarter and is still concentrating on expanding the game lineup on its global platform and bringing Mobage to iOS. The company also highlighted its decision to open a studio in Vancouver, British Columbia to support its first-party development efforts. DeNA also revealed it spent more than $12.4 million dollars on its new baseball team, the Yokohama DeNA BayStars.

DeNA currently has 35.92 million registered users and more than 1,500 games. While GREE now boasts 190 million users and 7,500 games, the majority of those come from its acquisition of the OpenFeint network and that unit historically has been a loss leader.