GigaMedia in Talks over Possible Merger or Sale

2 April 2009
On its fourth-quarter results this week, GigaMedia Ltd. announced it was in negotiations with parties it didn't identify over a possible merger or sale.

"With a view to maximizing shareholder value, we are now in discussions with several interested parties concerning the possibility of a strategic merger or sale," Arthur M. Wang, the company's chief executive, said during a shareholders' call Tuesday. "We have retained a financial advisor. No further information is available at present."

Mr. Wang said that should a merger or sale not be completed, the company would seek strategic acquisition targets as well as consider joining poker liquidity with other operators.

Gtech Corporation and 888 Holdings are thought to be among the front-runners for a liquidity-sharing deal, and a person familiar with the liquidity-sharing negotiations told IGamingNews an agreement could be reached in the near term.

For the fourth quarter, GigaMedia generated revenue of $44.6 million, down 2.4 percent, sequentially, and 6.5 percent against the previous-year period. Net income was $9.1 million.

Its poker business, Everest Poker, generated revenue of $24 million -- up 2 percent, sequentially, but down 10 percent, year on year.

"Going forward we look for reduced poker revenue . . . partially offset by the positive effects of the company's World Series of Poker sponsorship (episodes aired in international markets) and the introduction of VIP customer rewards program to improve player retention," Todd Eilers, an analyst with Roth Capital Partners, said in a note to clients.

Casino revenue came in $11.1 million, up 16 percent, sequentially, and 50 percent over 2007.

Quarterly revenue for company's Asian online gaming business, meanwhile, totaled $11.1 million, down 16 percent, quarter on quarter, and 5 percent against last year.

FunTown, GigaMedia's casual gaming portal in Asia, generated $6 million, flat over the previous quarter and year, while T2CN, its sports casual gaming portal in China, produced $3.5 million -- down 29 percent, sequentially, and 12 percent versus 2007.

For its gaming software business -- which comprises Everest Poker and Everest Casino -- management has guided that first-quarter revenue will likely fall 10 percent, sequentially, on weak consumer confidence in Europe and adverse currency movements. But the company's Asian online gaming business is expected to rebound, with first-quarter revenue forecast to rise 30 percent over the previous quarter.

When asked the company's prospects in the United States given the recent news flow around Barney Frank's expected bill, Mr. Wang said, "This is an enormous opportunity for us, and combined with our sponsorship of the World Series of Poker, we believe it represents huge upside for our business."

For the full year, the company generated revenue of $190.4 million, up 25 percent over 2007, with net income up 14 percent to $44 million.

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