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Online Gaming In Great Flux

"…Revenue, doubling annually, is expected to surpass $3 billion a year by 2003, according to River City Group, an industry consultant.

"`The prospects are phenomenal,' says Brian Haggerty, who invests in e-gambling stocks and edits eGaming News, an industry newsletter in New Jersey. `And the reason is, this industry is virtually unknown in terms of investment potential.'

"But for investors drawn to the hype, potential may be as good as it gets.

"…Tiny Total Entertainment, which runs a string of Web casinos and licenses software to other operators, is an object lesson in the dangers that face investors trolling for jackpots. Followers of the industry are often touting the company, but its stock has languished on the OTC Bulletin Board and company and legal documents raise questions about its founder's past.

"The shares haven't surpassed $2 in the company's two years of existence and recently sat at around 34 cents, giving the company a paltry market capitalization of $19 million. It has no profits, and revenue didn't surpass $1 million last year.

"The industry suffers problems ranging from questions of integrity to clunky technology

"…The industry is at war with the U.S. government, which has prosecuted some operators for violating a law against betting over the telephone. That has driven the industry offshore and put it under a cloud while Congress deliberates whether to approve an outright ban on Internet gambling.

"…And even if online gambling eventually wins U.S. sanctions, the business faces a severe test. Old-line casinos, with huge financial muscle, are likely to jump into the market, possibly trampling many players.

"…In the report, analysts Jason Ader and Marc Falcone describe an industry in great flux. Hope for operators, they say, rests in sorting out regulatory and trustworthiness questions and to what extent, if ever, established casino operators get into the business.

"…In the report, analysts Jason Ader and Marc Falcone describe an industry in great flux. Hope for operators, they say, rests in sorting out regulatory and trustworthiness questions and to what extent, if ever, established casino operators get into the business.

"`We expect Internet gambling firms to create ... bricks-and-mortar alliances to create the strongest and most loyal customer base by providing excitement and safe and secure transactions and fair playing odds,' the report says. `It will be necessary for these companies to form alliances in an effort to survive a mass consolidation in an extremely dense industry.'

"Ventures with just such apparent potential were arranged recently by MGM Mirage (MGG:NYSE) and Harrah's Entertainment (HET:NYSE). MGM's is with Silicon Gaming, a company that develops interactive gambling software, while Harrah's took a minority stake in iwin.com, a site where visitors can play games and win prizes…"

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