CryptoLogic slumps on contract warning

Click to follow
The Independent Online

CryptoLogic warned yesterday that it may lose a key contract to supply its gambling software to the betting exchange Betfair, which, if it occurred, would result in a "material" hit to its profits next year.

Shares in the company, which is Canadian but is also listed in London and on the Nasdaq in the US, plummeted 24 per cent to 1,047.5p on the news.

Betfair, which is preparing for its stock market flotation, told CryptoLogic it intends to bring the online poker software that it licenses from the company in-house. Betfair launched an internet poker business this year to cash in on rocketing interest in the game, and wants to develop its own internet poker technology.

CryptoLogic said if Betfair were to leave, its 2005 results would be unaffected. But the decision "could have a material affect on 2006 earnings if this revenue is not replicated with growth from other existing and potential new licensees".

The company makes about 30 per cent of its revenues from poker and analysts reckon the loss of Betfair could knock 10 per cent off its revenues. CryptoLogic said it was in talks with Betfair but no definite decision had been made.

Shares in CryptoLogic have soared in recent months in line with a boom in internet gambling. The online betting group Sportingbet has seen its shares more than double after buying an online poker business, Paradise Poker, and this summer the London Stock Exchange hosted the £5bn float of PartyGaming, the world's biggest poker website.