PartyGaming poker slowdown prompts downgrades

Online gaming firm PartyGaming reported a drop in the number of people playing its poker games in the last two months, overshadowing first-half results and prompting downgrades to earnings forecasts.

PartyGaming, which runs the PartyPoker site, said its trading since June 30 had been in line with the management's expectations except for poker which continued to be slightly softer than expected.

In the eight weeks to August 25, PartyGaming said average gross daily revenue was € million per day. Average active poker players totalled 50,800 per day.

Chief executive officer Jim Ryan, who joined the company at the end of June, said trading in poker since June 30 had been "slightly softer" than the company expected.

Mr Ryan said the poker business was continuing to be held back by competition from sites which accept players from the US.

"This represents a continuing competitive threat to listed businesses like PartyGaming that immediately stopped customers in the US from playing or making deposits on any of the group's real money sites following the enactment of the UIGEA (Unlawful Internet Gambling Enforcement Act)," Mr Ryan said.

He added that, while PartyGaming believes such companies are being investigated by the Department of Justice, there can be no guarantee that any action will be taken against them.

PartyGaming said it remains in discussions with the DoJ in the hope of securing a deal to end the threat of prosecution for taking internet wagers in the US prior to the UIGEA being enforced in October 2006.

He told reporters the company is targeting a successful resolution the DoJ this year, but emphasised the timeline for resolution of the talks is not within PartyGaming's control.

New non-executive chairman Rod Perry, who was previously senior independent director, is overseeing the talks.

"To bring continuity to the DoJ discussions Rod Perry, our newly-appointed chairman, will be taking over the day-to-day management of the DoJ process freeing me up and allowing me to focus my efforts on daily operations," said Mr Ryan.

Disappointment with current trading led to some brokers downgrading their earnings forecasts for the company.

In a research note, Deutsche Bank said PartyGaming's gross revenue was down nine per cent in August compared with July, while the average number of active daily poker players in July and August was 19 per cent lower than in the first half.