Shanda to acquire mobile game developer
By Bai Jia (China Daily)
Updated: 2004-09-09 10:33

Chinese online game company Shanda Interactive Entertainment Limited is set to buy a mobile game developer Beijing Digital-Red Mobile Software Co Ltd.

Shanda said yesterday that it will purchase the remaining interests of Digital-Red, after acquiring some minor stakes in January.

The deal will be paid in cash, but the biggest online game operator declined to disclose its amount.

The first instalment will be paid soon, while the remainder will depend on the performance of Digital-Red in 2005 and be paid in 2006.

Shanda's American depository shares closed at US$22.89 on Tuesday, up 5.48 per cent.

Previous reports said that Shanghai-based Shanda bought 35 per cent of Digital-Red's stakes at a cost of 6 million yuan (US$720,000) in January.

Vivian Li, a spokeswoman of Shanda, said the company had set a goal to build the biggest game development base in China, but it is not enough to purely rely on Shanda's organic growth in development.

"We want to buy the best development companies to boost our strength in game development," she said in a telephone interview.

Chen Tianqiao, chairman of the biggest Chinese online game operator, said early this year his company would spend US$10 million on research and development.

Shanda also announced in August it would acquire Hangzhou-based leisure game developer and operator Bianfeng and invest in Shanghai-based Haofang, known for its operation of games on local area networks.

Besides adding research capability, Li said the acquisition of Digital-Red will also enable Shanda to gain a strong foothold in mobile games.

Digital-Red is regarded as the biggest mobile game developer in China and has provided games to telephone makers like Nokia and Sony Ericsson.

Wallace Cheung, an Internet analyst with Hong Kong-based DBS Vickers, said the acquisition of Digital-Red signalled Shanda becoming more mature in the merger and acquisition field.

He said that while Shanda liked to acquire the whole of a targeted company at one time in the past, this time it decided to buy some stakes to have a closer look at Digital-Red and set the acquisition price according to its performance.

Cheung believed that the deal might also become a good preparation for the future, although it might be a significant revenue pool for Shanda in the near term.

The current downloads of mobile games is not very large, but if the third-generation mobile communications system is launched in one or two years, mobile games will become a hot application by then.

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