PartyGaming Sales Jump on Growth in Non-US Clients

PartyGaming Sales Jump on Growth in Non-U.S. Clients

July 21 (Bloomberg) -- PartyGaming Plc, the world's largest online poker company, said second-quarter sales increased 49 percent as it attracted more customers from outside the U.S., where the government is cracking down on Internet gambling.

Revenue rose to $319.3 million from $214.8 million a year earlier, the Gibraltar-based company said today in a statement. PartyGaming said it plans to expand into regions including Asia to further reduce its reliance on the U.S. Almost half of new poker players signed up in the quarter were located outside the country.

Shares of Web gambling companies including PartyGaming plunged in this week's first two days as U.S. prosecutors indicted online bookmaker Betonsports Plc and ordered the company to stop accepting wagers from the country, its main market. PartyGaming, which introduced backgammon last month, got 76 percent of second-quarter sales from U.S. gamblers.

``These numbers should provide some reassurance about the continuing growth of the industry,'' Charles Hall, an analyst at Panmure Gordon in London with a ``buy'' recommendation on the stock, said in a note to clients. Share prices won't stabilize, though, until there's ``greater clarity'' about the U.S. legal situation, he said.

1961 Law

The stock rose 4.5 pence, or 5.2 percent, to 91.75 pence at 11:28 a.m. in London. It has fallen 16 percent this week, reducing the company's market value to about 3.6 billion pounds ($6.5 billion). Investors paid 116 pence each for the shares when they were first sold to the public in June 2005.

The U.S. government views online gambling as illegal under a 1961 law against using telephone lines to place interstate bets. Betonsports was indicted a week after the U.S. House of Representatives approved a bill that would criminalize payment collection for Web casinos and make financial institutions help law enforcement shut down fund transfers to illegal gaming sites.

``My view of our business hasn't been changed at all by the indictment of Betonsports,'' PartyGaming Chief Executive Officer Mitch Garber told journalists on a conference call. ``PartyGaming is very different to Betonsports.''

The portion of sales coming from outside the U.S. may rise to around 50 percent in ``two to three years'' excluding mergers and acquisitions, Finance Director Martin Weigold told journalists.

Asian Expansion?

Growth outside the U.S. is ``among my top priorities,'' Garber said. ``Asia is just one place we are looking to expand into. If you want to be a global brand, you have to be in the biggest markets of the world.''

He cautioned, though, that PartyGaming probably will have to adapt its games to comply with local gambling laws in Asia. ``We are not just going to storm in and offer poker and casino the way we operate elsewhere if that's not legal to do so in China, for example,'' Garber said.

Second-quarter sales growth slowed from 54 percent in the prior three months and 63 percent for all of 2005. Second- quarter sales from casino games jumped almost sixfold to $76.1 million, or about a quarter of total revenue.

PartyGaming replaced a $200 million loan facility with a $500 million credit arrangement, the statement shows. The company cited ``attractive opportunities'' to expand in Europe and South America, without being more specific.

The company introduced blackjack in October and the PartyCasino Web site earlier this year, and it added bingo this month. PartyGaming inaugurated its first foreign-language Web sites in the first quarter and now offers PartyPoker in languages including French and German. It plans additions such as sports betting for gamblers outside the U.S.



To contact the reporter on this story:
Louisa Nesbitt in Dublin at lnesbitt@bloomberg.net