Crypto Sidesteps Row with Former C.E.O.

On a conference call with investors Thursday, CryptoLogic Ltd. made clear it would be discussing its return to profitability -- not an ongoing row with its former chief executive, Javaid Aziz.

Brian H. Hadfield, current chief executive of CryptoLogic, said the company would not be "distracted" from delivering its message to shareholders -- which detailed plans to cut costs, generate cash and grow revenue profitably -- by opening the call to questions about Mr. Aziz.

Mr. Aziz, who purchased an activist shareholding in early December, has been openly critical of CryptoLogic management since then. He is demanding that the executive board justify to investors significant declines in share value, cash, revenue and profit in 2008. He is also demanding two seats on the board, one for himself, another for a shareholder to be named later.

Publicly, Mr. Aziz's letters to the company, filed via the United States Securities and Exchange Commission in December and again in January, have garnered one reply.

In a stock-exchange statement on Dec. 23, CryptoLogic said that giving Mr. Aziz board representation would not be in the best interest of shareholders and cause "unwanted disruption at a crucial time in CryptoLogic's development."

"There are too many CEOs, Chairman and Boards who forget who the real owners of the company are," Mr. Aziz told IGamingNews Wednesday evening in an e-mail. "It is the shareholders who are the ultimate paymasters, and they have an undoubted right for their views to be heard, to be considered and then acted upon. Any time an owner expresses a view they seem nowadays to be rubbished by the Board, which is unacceptable."

Responding Thursday morning, Mr. Hadfield told IGamingNews via the company's public relations firm in North America, Argyle Communications:

"CryptoLogic takes its investor relations very seriously, as we showed today with a special update for shareholders on our plan to transform the company and return it to profitability. We have also provided very specific targets for 2009 -- such as profit of $9 to $10 million -- and in the past year have significantly increased communication between CryptoLogic’s management and our shareholders."

Mr. Aziz on Thursday did not respond to an e-mail seeking comment on the message delivered during the investor call.

Looking ahead, Mr. Hadfield told investors he expects the company will be profitable and cash generative from the second quarter of 2009, following the conclusion of its cost-reduction program. He said that for the full year, profits will likely range between $9 million and $10 million.

Todd Eilers, an analyst with Roth Capital Partners, said meanwhile he expects near-term trading to be weak.

"We remain cautious in the near term with expectations for a weak 4Q08 and 1Q09," Mr. Eilers wrote in a note to clients Thursday. "We also believe the loss of William Hill and Littlewoods (~20-25% of rev) could limit incremental contributions from new partners in FY 09.