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Yahoo! Acquires PlayerScale

Internet giant Yahoo! Inc. (YHOO) recently announced its acquisition of gaming infrastructure start-up PlayerScale for an undisclosed amount.

Belmont, Calif.-based PlayerScale was founded in 2009. It develops infrastructure software for various gaming platforms across the social and mobile space. PlayerScale has 100 million users with 4000 titles from over 2,600 developers worldwide.

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; Jybe, a social recommendation site and Loki Studios, a mobile gaming start-up.

The acquisitions are 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 continue to accelerate.

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 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 also declining not only because of Google but also Microsoft (MSFT), Yahoo needs to focus on other major growth markets and emerging geographies.

In the first quarter of fiscal 2013, Yahoo generated revenues of $1.14 billion, which were down 15.3% sequentially and 6.6% year over year. Traffic acquisition cost (TAC) was 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 #2 (Buy).

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