For Party, Currency, Competition Culling Revenue

6 February 2009
Forex headwinds and stiff competition in PartyGaming's core poker market saw the operator record its third consecutive quarter of top-line decline.

Net gaming revenue for the quarter, $100.4 million, was down 17.9 percent against the same period last year and 14.6 against the previous quarter.

Like its rival 888 Holdings, PartyGaming said income was skewed partially by fluctuations between its reporting currency, the United States dollar, and depositing currencies like the Canadian dollar and British pound.

By segment, poker logged the most precipitous decline, down 25.5 percent over last year and 15.2 percent, sequentially. Because the majority of Party's income is derived from poker, the company remains exposed to both slowing secular growth and market-share losses to America-facing operators like PokerStars and Full Tilt.

Despite forecast consolidation, M&A activity in the listed poker sector has been relatively quiet in recent months. Ladbrokes Poker was scheduled to merge with Microgaming Software Systems Ltd. around the New Year, while CryptoLogic Ltd. continues to migrate some of its licensees to Gtech Corporation's International Poker Network.

Casino, meanwhile, fell 5 percent to $40.2 million against 2007 and 12 percent versus the previous quarter. Bingo, $1.2 million, was up 71 percent year over year but down 29 percent, sequentially. Finally, sports betting, $3.9 million, was down 23 percent versus last year and the previous quarter, respectively.

On the business-to-business front, however, a spot of positive news: Making good on last quarter's promise to "overdeliver and surprise," the company announced a three-year deal with Spain's Cirsa Gaming Corporation, a terrestrial operator with ties to the Latin and South American markets.

Little color on the deal was given, but the two companies are to explore online gaming opportunities in Spanish-speaking markets. The deal would appear timely for both operators, with Spain's ruling Socialist Worker's Party under intensifying pressure to introduce federal Internet gambling regulation.

Negotiations with the Justice Department are progressing, the company said.

After a stock-exchange statement in December indicating talks were "at an advanced stage," James A. Ryan, the company's chief executive, once again reminded that there was no guarantee a deal would be done. Mr. Ryan has been less bullish than his predecessor, Mitchell A. Garber, who said the United States legacy issue would likely be resolved in 2008.

Opinions vary on Party's prospects in the United States, assuming a settlement is reached. Paul Leyland, analyst with Collins Stewart, thinks the company is unlikely to receive a license there if regulation were in effect, while an industry insider not affiliated with PartyGaming told IGamingNews last month that the company will likely supplant PokerStars as the largest poker brand in America.

Regarding current trading, the company said currency fluctuations continue to impact reported income. Average gross daily revenue, $1.42 million, was down 2 percent relative to the fourth quarter. And while daily poker signups were up, rake was down 4 percent, sequentially.

Full-yearly results are due out March 11.

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