Fresh off the announcement of its partial sale of Everest Poker earlier this month, GigaMedia announced its second and third quarter 2009 financial results. In addition, the company provided insight into the sale.
During a recent investors’ conference call, many of the major players in GigaMedia were present to offer information on the company’s second and third quarter financial results. Most of the thoughts of those gathered were focused on the sale of 60% of Everest Poker, the popular online poker room that is currently the on-felt sponsor of the World Series of Poker (WSOP). Arthur Wang, Chief Executive Officer of GigaMedia, stated he was there to present the overview of “where the company is and where it is going,” but first stepped up to offer reasons for the sale of Everest Poker.
“About one year ago, we began a strategic review of this business unit, an evaluation of where the market was moving and where we were positioned in relation to such movements,” Wang stated. “We determined that, despite our rapid growth and position as the fourth largest poker site in the world, a strategic move was necessary.”
Wang then ticked off a list of reasons for the divesture of a majority ownership of Everest Poker to Mangas Gaming. He cited current trends in the regulation of online gaming in Europe, where individual nations are setting up their own regulatory rules, which Wang stated is “limiting player pools to single country players and requiring heavy in-country investments in infrastructure and personnel.” This type of regulation, Wang noted, challenges the ability of a company such as GigaMedia to run an operation that encompasses the entirety of Europe.
Wang next said that the necessity to have an all-purpose operation – to not just offer online poker, but also the full range of products such as a casino, sports book, and other gaming outlets – was another reason behind the sale. Mangas Gaming, through its majority ownership, will be able to provide those operations. Finally, Wang stated that the continued presence of “poker competitors operating illegally in the United States” and the hundreds of millions they earn continued to hamper those companies that operate exclusively in Europe.
With the discussion of the partial sale of Everest Poker to Mangas Gaming complete, the presentation of the second and third quarter 2009 fiscal reports was made. Quincy Tang, Chief Financial Officer of GigaMedia Limited, presented a report that showed a drop in performance over the second and third quarters of 2009.
The consolidated results of both quarters was “worse than expected,” according to Tang. “Second and third quarter revenues were $37.7 million and $37.2 million, respectively; second quarter net income of $128 thousand and third quarter net loss of $2.4 million,” he said. Some of the reasons for the decline were attributed to the continued global economic downturn and its effects on player spending and the competitive nature of the industry, including the challenges faced from those companies that accept American action.
The partial sale of Everest Poker to Mangas Gaming will give GigaMedia an influx of $100 million early in 2010. After the deal was announced, GigaMedia stock rose to $4.24 on the NASDAQ exchange, where it can be found under the acronym “GIGM.” At the close of business for the Christmas holiday, GigaMediastock was trading at just $3.18, near the bottom of its 52-week range.
