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UK
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News
09 August 2005
Cryptologic May Lose
Betfair
Gaming
software developer CryptoLogic
has said it may lose one of its poker-software
customers - Betfair, which wants to bring its core products
in-house.
Shares of CryptoLogic,
which develops and licenses Internet gambling software, fell
before recovering a bit late in the morning on the Toronto
Stock Exchange. On Nasdaq, it fell $5.26, or 22 percent, to
$18.62.
CryptoLogic said it is
still in talks with Betfair and that no definite decision
has been made.
It said Betfair could
establish its own poker room and terminate its contract with
WagerLogic, CryptoLogic's licensing subsidiary, which pulls
in around 30 percent of the company's sales.
"If Betfair were to leave
the central poker room, it is not expected to affect
CryptoLogic's 2005 results," the company said in a
statement.
However, it said the loss
of Betfair "could have a material affect on 2006 earnings if
this revenue is not replicated with growth from other
existing and potential new licensees."
David Shore, an analyst
with Desjardins Securities, said the market overreacted to
the news.
"They haven't said how big
Betfair is relative to their poker business, but if you
assume it's 25 percent of their poker business, you could be
looking at a 10 percent revenue hit," he said.
"We believe that the
casino business is more profitable than the poker business.
So under that scenario, that would be less than 10 percent
impact on earnings. Even if you assume it's as profitable,
or even more profitable, I think the market has kind of
overreacted here."
For the second quarter,
internet poker accounted for 30 percent of CryptoLogic's
revenue, while casino software contributed 60
percent.
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