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Emily D. Swoboda

The List Revisited (Continued)

2 February 2007

Fun Technologies (AIM)

Description: Internet skill games provider

After the enactment of the UIGEA, Fun Technologies asserted that because it is a company that offers games of skill the ban does not apply to them. The assertion did not, however, reflect in the market where Fun's stock continued to depreciate following the ban.

With the release of its trading update on Jan. 11 for the year ending Dec. 31, 2006, the company reported un-audited increased revenues in excess of 80 percent over its 2005 revenue. Full financial results will be released upon final close procedures and external audit.

Global Approach Limited (ASX)

Description: Online Casino Operator

Australia-based Global Approach Limited (GAL) on Oct. 16 announced a policy to no longer accept U.S. bets, which accounted for approximately 80 percent of casino revenue and 20 percent of poker revenue. This decision resulted in the reversal of a deal between GAL and Tusk Investment Corporation which would have seen GAL acquire Tusk's online casino and poker room assets for $19.3 million.

Leisure & Gaming (AIM)

Description: Online casino, poker and sports book operator

Leisure & Gaming's (LNG) CEO Alistair Assheton announced Oct. 13 that he would lead a management buyout of the company's U.S. operations for $1, saving the company $6 million in shutdown costs.

In a trading update on Jan. 15, LNG said it expects trading for the year ended Dec. 31, 2006 to be in line with market expectations. The company said revenues from continuing operations in the second half were substantially above the company's forecasts. On the down side, the company said its sports betting margins were lower than expected due to adverse sports results. The company, which has won 47 licenses in Italy for horse racing and sports betting, added that its net win exceeded its forecasts, but it expects gross profit to fall short as Italian betting tax is charged on revenue rather than on net win.

Neteller (AIM, suspended)

Description: Payment processor

Neteller initially said the U.S. ban could have a "material adverse effect" on its U.S. arm, but did not stop serving U.S. customers right away. In recent weeks, however, the company has had little choice in the matter. On Jan. 18, the company announced its complete withdrawal from the U.S. Internet gambling market, wiping out 65 percent of its business.

While the company cited the impending regulations for the UIGEA as the primary reason for the withdrawal, the announcement came three days after the arrests by U.S. authorities of former Neteller directors on Stephen Lawrence and John Lefebvre on charges of money laundering in connection with Internet gambling. They were arrested separately on Jan. 16 on warrants out of New York. Both have been released on bail and await trial in New York.

Meanwhile, Neteller has temporarily disabled the use of the Neteller ATM card for U.S. residents and said that money transfers to and from the United States are delayed.

PartyGaming (AIM)

Description: Online gambling company and poker brand

PartyGaming announced on Oct. 13 that it was immediately suspending all "real-money gaming activities" for U.S.-based customers, three-quarters of its customer base. Its play-for-free Web sites, however, are still available to customers in the States.

The company revealed one week later that turning away U.S. players would cost the company $250 million and that revenues from its non-U.S. operations had fallen. The company also said that since it stopped taking U.S. play , average daily revenue from its non-U.S. operations had fallen 2 percent.

PartyGaming reported better news on Dec. 14, saying that revenues had stabilized after the U.S. I-gaming crackdown. Excluding sports betting, gross daily revenue averaged $921,000 over a four-week period ending Dec. 11. Gross daily poker revenue averaged $721,000, after hitting a $637,000 low in October. Party also reported 945 job cuts--roughly 41 percent of its workforce--as part of its downsizing initiative.

PartyGaming on Dec. 29 agreed to purchase certain online gaming assets of rivals Empire Online (EOL) and Intercontinental Online Gaming (IOG) for total consideration of $66.3 million in shares to help replace revenue lost when it was forced to leave the U.S. the UIGEA passed.

Through the deal PartyGaming acquired EOL's, and and IOG's Fair Poker, Magic Box Casino and Miss Bingo sites, and forecasts a combined year-end profit of $8.5 million ($6 million from EOL and $2.5 million from IOG) in 2007 from the acquisitions.

Playtech (AIM)

Description: Online gambling software provider

Playtech on Oct. 6 announced it would stop licensing its software to existing and future operators who accept bets from U.S.-based players following the enactment of the UIGEA.

Playtech on Nov. 13 announced that it had agreed to buy parts of industry rival Tribeca Tables for $75 million, which would enable Playtech to absorb business from a number of Net gambling Web sites currently operating on Tribeca's poker software platform, including VC poker, PaddyPower Poker, Blue Square Poker and Expekt.

Playtech said the deal was in line with its strategy of extending its geographical reach following the enactment of the UIGEA.

The fate of Tribeca's U.S.-facing licensees--Golden Palace, Doyle's Room and others--has yet to be determined.

Playtech is in preliminary talks with a pure Asia-facing gaming business over a new licensing agreement, the company said on Tuesday. "Owing to confidentiality agreements, the company is not able to provide further comment at this stage and will update the market when appropriate," it said in a prepared statement. The company on Dec. 20, 2006 announced a five-year licensing agreement with China-based gaming group Sino Strategic International.

Sportingbet (AIM)

Description: Online sports book, casino and poker operator

Just hours before the I-gaming ban was enacted, Sportingbet announced the sale of its U.S.-facing operations for a nominal $1 to Antigua-based Jazette Enterprises. The sale reportedly wiped $13.2 million of debt off Sportingbet's books and spared the company an estimated $14 million in closing-related expenses. Sportingbet, which did 60 percent of its business in the United States prior to the sell-off, has turned its focus to its European sports betting, casino and poker businesses and its Australian sports betting business. It also retains control of Paradise Poker, which no longer services U.S.-based customers.

The company in late November posted first-quarter losses of £241.4 million, attributing the massive loss to £252.3 million in shut-down costs associated with selling the U.S.-facing businesses and banning U.S. residents from playing at its poker site, Paradise Poker. It nevertheless reported an increase in gross profit up to £31.7 million from £21.4 million the previous year.

Sportingbet has some recent cause for optimism. The company last week reported improved betting margins and said that it expects its Paradise Poker site to attract more players in the coming months.

Sportingbet is also getting ready to launch a Spanish-language version of its poker site within a month, with a Brazil-focused site to follow. Losses sustained after the enactment the UIGEA, however, make a dividend unlikely in the year ending July 2007, CEO Andrew McIver said.

The List Revisited (Continued) is republished from
Articles in this Series
Emily D. Swoboda
Emily D. Swoboda