Friday, 22 June 2012

Gaikai is Up for Sale

Fortune is reporting that cloud gaming company Gaikai is up for sale. Their sources have told them that Gaikai has already hired bankers and they are expecting to be acquired for well in excess of $500 million.

Headquartered in Aliso Viejo, Southern California, Gaikai is backed by Benchmark Capital, Rustic Canyon, NEA, Intel Capital, Qualcomm and Limelight Networks, and has raised around $45 million in VC funding.

Considering that cloud gaming is a capital intensive burgeoning business, one might think that the company has run into some money problems with their business model of providing free high-end cloud gaming demos and they can't convince their investors to pour more money into them or find new investors that are willing to risk with cloud gaming. Of course it might also be that the company and their investors have together decided that they need a large influx of cash to grow their business faster, or one or more investors want to purchase the company.

If one of the investors wanted to buy the company, the logical choice would certainly fall on Intel, as they would be very much interested to grow the cloud gaming business and use a lot of their chips in the data centers.

Gaikai also recently partnered with NVIDIA and will use NVIDIA's Geforce GRID cloud gaming technology in their data centers. The pair of Gaikai and NVIDIA certainly look very complementary, but I don't think that Intel would be well inclined towards letting the Green Goblin get Gaizilla and grow their GPU business around cloud gaming, as Chipzilla regards the Green Goblin as a deadly rival.

Another potential buyer could of course be Samsung, as Gaikai has recently announced a partnership with Samsung in which Gaikai will power a cloud gaming service for Samsung. They certainly have the money. And Sammy's big rival in the mobile space Apple, that is also betting big on cloud, could also find some change in their deep pockets to snap up Gaikai.

Let us not forget that Gaikai was a lot in the news before E3 because of a rumored buyout or partnership from Sony. At E3 nothing came of it, but this doesn't mean that the possible deal still isn't hot. And where there is Sony, Microsoft and Nintendo certainly are not far away.

Well, the list of potential buyers goes on and on like the telco giants, other large tech companies, the entertainment giants, the large game publishers like Activision Blizzard and EAGameStop, Valve or even Facebook. Because Gaikai is providing cloud gaming services for other companies, they stated that they wish to remain neutral, being Switzerland of the cloud gaming world. This could limit their choices, but money can move such limits and a lot of money can get rid of such limits.

Of course there is also OnLive, the pioneer of cloud gaming and Gaikai's biggest rival. Early last year VentureBeat put OnLive's overall valuation at $1.8 billion, which means that by now that valuation must have increased considerably. OnLive was also part of the Sony buyout or partnership rumors before E3, and recently some leaked Xbox 720 roadmap PowerPoint slides surfaced that put OnLive up as a potential Microsoft acquisition target. OnLive is quite a formidable force in cloud gaming, as they continuously operate a full cloud gaming service for over 2 years and were also granted many important patents in the field of cloud gaming. These facts could make a Gaikai acquisition less enticing for potential buyers, and of course less lucrative for Gaikai and their investors.

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