Party Poker Blog

Thanks to my Irish friend, DB, I keep getting tipped off to the best of New York Times coverage of our beloved game of poker.

From today, per Party Poker:

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PartyGaming Still In Talks to Cut U.S. Deal
By REUTERS

Filed at 7:24 a.m. ET

LONDON (Reuters) - Online gambling firm PartyGaming Plc reported first-half earnings in line with previously lowered expectations and said it was still trying to cut a deal with U.S. authorities following a crackdown on gambling there.

PartyGaming , the world's biggest online poker firm, on Wednesday posted earnings before interest tax, depreciation and amortization (EBITDA) from continuing operations of $36.9 million in the six months to June 30.

This compares with an EBITDA of $380 million in the same period of 2006, before the forced withdrawal from the United States.

PartyGaming also made a pretax loss of $32 million on revenue of $212.5 million, down from revenue of $662 million before the U.S. clampdown a year ago.

Like most online gaming firms, PartyGaming is battling to recover from the effective ban which closed off the world's biggest gambling market and wiped around 75 percent off PartyGaming's share price.

PartyGaming shares, which have shrunk by around a sixth in value since a 2005 initial public offering and have dropped 60 percent in the last four months, rose 12.1 percent to 25.47 pence by 1146 GMT (7:46 a.m. EDT).

U.S. TALKS ONGOING

The firm started talks with the U.S. Department of Justice in April in the hope of cutting a deal to remove the threat of retrospective prosecution for taking bets from U.S. gamblers.

Clearance would also open up options such as borrowing cash from banks currently wary about a U.S. backlash and remove concerns which are preventing much anticipated consolidation in the sector.

Chief Executive Mitch Garber told Reuters talks with the DoJ were "quite fluid" and said he hoped that the end was in sight.

"I don't know (how long talks with U.S. will go on), I can look at NETeller that took months not years, so if I judge from what I've seen then it's months, but I don't know."

The firm is seeking deals in emerging markets such as Russia and China and Garber said it was also close to signing deals with big European media firms.

"We will launch some very meaningful partnerships with large companies that will bring us other revenue streams."

"We'll do deals with either new media companies or companies that license brands... whitelabelling and revenue sharing."

He added that company remained comfortable with market forecasts for 2008 which require it to boost EBITDA by 50 percent.

"It's not going to be without difficulty."

"We are completely redeveloping bingo and we will launch it formally in the next month... We have spent a lot of money front loading players and that has also been bearing fruit."

The results were in line with analysts' reduced expectations following a profit warning in May when PartyGaming said the cost of attracting new gamblers and the lower spending habits of European players would hit profits.

Analysts remained divided in their assessments.

"Everything is sort of in-line after the profits warning," said Arbuthnot analyst Paul Leyland.

"The big question is can they deliver 50 percent EBITDA growth in 2008 as the market is expecting and I see nothing in these results to suggest they can," he added, maintaining his sell recommendation.

Numis analyst Richard Carter who has a buy rating on the stock was more bullish.

"Upside key risks include positive US/European eGaming regulation or deals in China/Russia. On the downside the key risks include a further deterioration in player yields and the loss of key markets."