Yahoo! Acquires Loki Studios

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Internet giant Yahoo! Inc. (YHOO) recently announced its acquisition of a mobile gaming start-up called Loki Studios for an undisclosed amount.

Loki Studios was started by students from Stanford University. It develops games based on user’s location information such as weather, temperature and time of the day among others, to make the gaming experience more real.

Yahoo! is marching ahead with its plan to acquire struggling start-up companies.  Some of its recent acquisitions include Astrid, a task-management app maker;Summly, a news-condenser app maker; Stamped, a mobile-review app maker; OnTheAir, which specializes in broadcasting video chats or interviews to online audiences; Snip.it, which is a kind of clipping service for the web; Propeld, a location-based apps maker and Jybe, a social recommendation site.

The acquisitions are a part of a strategy to broaden and strengthen Yahoo!’s expertise in the mobile segment, as adoption of mobile devices such as smartphones and tablets continues to accelerate. Even though Loki Studios focuses on mobile gaming, the team will now focus only on mobile.

With these acquisitions, Yahoo is picking up a whole lot of engineering talent as well as key technologies and products at a cheaper rate. These acquisitions can help Yahoo! enter the emerging Social Marketing segment, where its rivals have already established themselves.

The acquisition of these start-ups is a part of Yahoo’s strategy to strengthen its mobile offerings as it has lost its leadership position in display advertising to Facebook (FB) and Google (GOOG). With search advertising revenues on a decline not only because of Google but also Microsoft (MSFT), Yahoo needs to focus on other major growth markets and emerging geographies. After the acquisition of Loki, Yahoo!’s Mobile team is now 22 entrepreneurs strong.

In the first quarter of fiscal 2012, Yahoo generated revenues of $1.14 billion, which was down 15.3% sequentially and 6.6% year over year. TAC costs were down 42.3% sequentially and 49.9% year over year. Excluding these costs in all periods, net revenue was down 12.5% on a sequential basis and 0.8% from last year, short of the consensus estimate.

Yahoo has a Zacks Rank #1 (Strong Buy).

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