Electronic Arts to Buy Jamdat Mobile

Updated from 5:45 p.m. EST

Already the dominant publisher of video games for consoles, Electronic Arts (ERTS) made a play Thursday to become the game leader on mobile phones as well.

The company announced an agreement to purchase Jamdat (JMDT), the leading independent publisher of wireless games. Under the deal, EA would pay about $680 million in cash for Jamdat's outstanding shares, which represents about a 19% premium to their closing price on Thursday.

EA decided to pay that premium because it believes wireless games will be a key growth driver in the future, said company CEO Larry Probst in an interview with TheStreet.com. The wireless games market is worth about $1 billion now and should grow significantly in coming years, he said. Although EA had been developing its own wireless business, the company decided that buying Jamdat would speed its efforts, he said.

"We want to be the leading player in the growth cycle," said Probst. "This accelerates our time to market."

Jamdat investors cheered the transaction, sending that company's stock up $4.23, or 19%, to $27 in after-hours trading. Shares of EA held steady after-hours at $55.75.

EA is the dominant independent producer of video games for consoles such as Sony's (SNE) PlayStation 2. Analysts continue to expect that market to grow, especially with the release of new game machines such as Microsoft's(MSFT) recently debuted Xbox 360. But many see the wireless game market as potentially a faster growing new area.

Jamdat, for instance, has seen sales more than double in the first nine months of this year, growing to $54.6 million from about $25 million in the same period last year. In contrast, EA, stymied by the current console transition, has seen sales fall 9% in the first six months of its current fiscal year, dropping to $1.04 billion from $1.15 billion in the same period a year ago.