888 Says First-Quarter Trading Disappointing, M&A on Horizon

5 May 2009
888 Holdings, the online gambling operator, reported first-quarter revenue fell 4 percent, sequentially, on "disappointing" business-to-consumer trading.

Total operating income was $57 million, down from $60 million the previous quarter.

Operating income from the company's b-to-c offering fell 8.1 percent to $45 million compared to same quarter last year.

Casino, the company's core b-to-c proposition, came in at $26.7 million, down 25.4 percent over 2008. The first quarter, moreover, marked the casino's third consecutive quarter of decline.

Poker, $13.7 million, fell 37.4 percent versus last year, while emerging offering -- a segment comprised of bingo, live-dealer games and sports betting -- rose to $4 million from $1 million.

Operating income from the company's business-to-business arm Dragonfish, split out for the first time, was $12 million, up 9 percent over the previous quarter.

On a conference call with analysts and investors Tuesday, Chief Executive Gigi Levy said the company was reviewing a number of strategic acquisition opportunities.

He later told Reuters that 888 is in talks with five different parties, and that one of the deals could be valued at more than 10 percent of the company's revenues and profits.

After customer liabilities, the company has cash of $78 million and no debt.

Analysts with Jeffries International Ltd. in London said 888, with a market capitalization of £337.5 million, would "be an attractive target or merger partner in the event that the long-awaited consolidation of the online sector progresses."

EGaming Review reported Tuesday that 888 could be making a run at Cashcade Ltd., the parent company of Foxy Bingo, though Mr. Levy did not confirm that report.

Meanwhile, regarding the company's ongoing negotiations with the United States Justice Department, Mr. Levy said talks are progressing but did not offer any material update.

"There are daily changes on the regulatory front in the United States -- at least the legislator Barney Frank's bill -- that have some implications on any future discussion," he said on Wednesday's call. "These are very determining times in the future of online gaming in the United States, and the DOJ discussions are all part of this bigger picture."

The company said average daily revenue for the second quarter has risen 3 percent over the first quarter, led by stronger trading in casino and emerging offering but offset by weaker trading in poker.

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