CryptoLogic Unveils 'Global Strategy for a Global Industry'

28 September 2006

Amid the recent busts of British and Austrian I-gaming executives and the general shakeup rattling the industry, online gambling software provider CrytpoLogic has pulled up stakes, heading to the friendlier legislative confines of Ireland in January to further its growing international operation.

"CryptoLogic's business is increasingly centered in Europe," CEO Lewis Rose explains. "Establishing our organization in that market is the logical next step to support our international growth plans . . . and expand in . . . gaming-friendly jurisdictions."

The company will maintain its Toronto and NASDAQ listings, but will use the Alternative Investment Market (AIM) of the London Stock Exchange as its primary trading vehicle. Its software development team will remain Canada.

The move will reportedly incur a one-time expense of between $8 million and $8.5 million, roughly 10 percent of which was expensed by June 30.

Rose will remain as the company's chief executive during the initial stages of the transition into 2007, though he will not relocate to Ireland permanently "for family reasons." CryptoLogic has announced that the search for a new CEO is already underway.

In a research note to clients, Desjardins Securities analyst David Shore said he was not taken aback by news of CryptoLogic's move to Ireland, "given the proximity to its key customers," as well as ongoing "regulatory uncertainty" in North America.

"The U.K.'s established online gaming regulatory framework provides a stable operating platform and the AIM provides a receptive capital market," Shore said.

While the regulatory frameworks of several other EU member states are under investigation by the European Commission, Rose believes CryptoLogic can successfully negotiate the legal morass.

"We are in a global industry, and a global industry requires a global strategy," Rose said. "There are 243 countries around the world. CryptoLogic has grown successfully with two-thirds of the business now coming from international sources. There's no reason to believe that that won't continue. To turn it around: There's every reason to believe that that growth can continue in gaming friendly environments."

On the NASDAQ, CryptoLogic shares closed Wednesday following the AIM announcement at $22.29, down $1.64 (6.85 percent).

Chris Krafcik is the editor of IGamingNews. He lives in St. Louis, Mo.