Seattle's PopCap readies for IPO game

Zynga is getting all the attention from game-company investors now, with the San Francisco maker of Facebook titles reportedly valued at $10 billion.

But Seattle's PopCap Games may be next.

After hinting for many months about going public, the company's now aiming for an initial public offering in late fall.

PopCap doesn't have the scale of hot consumer startups such as Zynga, Twitter or Groupon. But it could still benefit from investors' growing interest in strong brands riding the growth of Facebook and mobile devices, where its games have been hits.

"At this point we're just heads down trying to get ready for the IPO," Chief Executive Dave Roberts said last week in PopCap's funky Belltown offices.

About 200 of the company's 400 employees occupy four floors above a credit union. Others are concentrated at offices in Europe and Asia.

It's a long way from the attic where the three founders — John Vechey, Jason Kapalka and Brian Fiete — started the company in 2000, racking up $30,000 in credit-card debt before PopCap took off.

In 2001 "Bejeweled" became a runaway hit, establishing the company and marking the dawn of the Seattle-centered casual-game industry.

Last year sales broke $100 million, crossing a common threshold to attempt an IPO. But Roberts said it won't proceed until PopCap is sure the offering won't harm the company's culture and patient approach to game development.

Analyst Michael Pachter, at Wedbush Morgan Securities, said PopCap is a good candidate for an IPO with its creativity and strong portfolio, including franchises such as "Zuma," "Peggle" and "Plants vs. Zombies."

"There's a lot of growth in the areas that they're in," he said. "They're in casual, social, mobile. Those are the places people want to be, those are all growing 25 percent a year or more."

Here's an edited excerpt of the interview of Roberts:

Q: PopCap seems to be saying IPO a lot lately.

A: You whisper that word and the press eats it up. I'm not saying anything different. People are paying attention to it more.

Q: So you really are going for it?

A: What I have been saying is we're going to be ready at the end of this year. I guess I'm being more specific about the timing.

Whether we do it or not is still going to depend on a whole bunch of things — whether the market's ready, whether we're as a company ready. Whether it happens or not, I don't know.

Q: You've been taking steps to prepare?

A: We've been kind of doing it along the way. But like so many things, we're slow and deliberate about all this stuff instead of the "quick, let's have the three-month ready-to-go-public plan."

Q: So your revenues are high enough to go public?

A: 2010 was our first $100 million year. You ask different people, they have different metrics for what you need to go public, but we've always assumed 100 was the number you want to be at.

Q: How are things going? Will it be $110 million, $150 million, this year?

A: Things are going great. I'm not saying anything about what it will be this year, but we've had consistent growth for a long time. For 10 years we've had year-over-year growth. Hopefully we'll still do that. There are some really great successes right now in the mobile business, particularly the iPhone-smartphone business, and in social [games]. We're seeing just huge amounts of growth in those two sides; the Facebook games are doing great.

Q: I had heard the social-games business was cooling.

A: These big fads come and then they go. We don't ride them up as high as a lot of people do; we didn't go all-in with Nintendo Wii or even Xbox Live when those things were hot. We're always in them fairly deliberately and we ride the big wave out and keep a good steady business there after it's all done.

It's always good for us when the fervor dies down and it turns into a nice, rational business. So for us Facebook is a great place right now and we're seeing great revenue growth.

Q: Other game executives have told me the iPad and tablets will revive the casual-game industry.

A: I absolutely think it's going to be great for the industry and it's already been great for us. They're supposed to be selling 2 million of those a month, just the Apple ones. We're pretty excited about it.

If all it's doing is taking gamers from one place to another, that's really not as exciting to us, because we're about trying to get all those ma and pa people who could play games but don't think they can. That's always been our challenge — how do we get the 45-year-old woman to declare, "I could play games."

What the iPhone did was take a few million people and convince them they could play games and then the same thing happened with Facebook. I give "FarmVille" a lot of credit. There are 200 million players or whatever that now say, "I play video games." That's the first step for them to understand our games are appropriate for them and really expand that market.

Q: How do you feel about Android?

A: We're a little wait-and-see. ... It's not quite as clean and simple as the Apple platform. Right now, it's still a little bit fragmented and I don't think anyone's making a lot of money on Android yet, even though they're selling a lot of units.

Q: Sometimes when companies start talking about IPO it's because they may be acquired. Could that happen?

A: Anything could happen. We've been talked about as an acquisition target a lot over the years. The goal is kind of the same. We're trying to build a legacy of great enduring games. If that is better done with an IPO, we'll do an IPO. If there's an acquisition that makes sense for that — and the right partner was there at the right time — we might do that. But we don't really change our business based on either one of those.

Really, we'd love to be at a place in the future where we have some of the best-known brands for games. Right now we have some of the best known video-game brands. But when you say the best-known game brands you think "Monopoly," "Scrabble." We want to displace those old-fashioned board games.

Q: If you drop the "v" word you might get more players, right?

A: That's it. Right now "video game" is a bad word. It scares people. The 50-year-old woman says, "I can't play video games." She probably is starting to right now.

Q: What about the slowdown in video-game sales?

A: All of our businesses have been growing. We never really had a bad year from the downturn. We were afraid we might ... and never really had it.

Q: Can you keep up the pace?

A. We think we can keep the steady growth for a while, partly because there are a lot of opportunities. We've been investing in Asia for a couple of years now — three or four — and that stuff is only starting to come out this year. I think there are some huge opportunities if we can be one of the few game companies that succeeds both here and in Asia.

Q: What would you do with money generated by an IPO?

A: There's probably a step function of investment in our future to become a bigger consumer brand. I think we've done an awesome job as the grass-roots brand we've created, but we still don't have the brand-recognition that you want to be "Monopoly" or "Scrabble." To do that, we'd have to up our investment levels to make bigger bets than we've ever been able to do before.

We don't have to do that tomorrow; this isn't the sort of thing that by the end of the year we'll be spending $25 million on Super Bowl ads. I would never pretend you could grow the company that way. But at some point we need to do a better job of being a consumer-branding company, a consumer-marketing company.

Q: In the U.S. or internationally?

A: A lot of it is international. That's probably what would drive a lot of the need for an IPO.

We're in the midst of being what we think of as a game operator. Games are more like a service on multiple platforms. Even the iPhone games are like a service, because we have high-score servers we have to run in the background.

We're doing a pretty good job there. The next step would be, OK, once all games are connected and social, the opportunity to be a bigger consumer brand is really there. That's our charter, our path to getting to displace "Monopoly" and "Scrabble" as the game brands people think of at the top of mind.

Brier Dudley's column appears Mondays. Reach him at 206-515-5687 or bdudley@seattletimes.com.