Cryptologic's share price took a 25% beating earlier this week, due to the announcement that BetFair poker, one of Cryptologic's nine poker licensees, has plans to develop it's own poker room. The fast growing poker business currently accounts for 30 percent of Cryptologic's revenue.
Lewis Rose, Cryptologic's CEO commented: "While Betfair has launched a successful, profitable site using CryptoLogic-developed software, Betfair's long-term strategy and practices in its core business has been built on technology solutions designed and developed internally. [...] Decisions consistent with this strategy could result in Betfair establishing its own poker room and the termination of its contract with WagerLogic Ltd., the licensing subsidiary of CryptoLogic, in early 2006."
Rose furthermore added that talks with BetFair were still ongoing, and that no final decision had been made yet. However, if BetFair were to leave Cryptologic, it could have an impact on projected revenues for 2006.
Cryptologic released solid second quarter results, with a 47 percent profit increase, well ahead of analysts' results. Despite BetFair contributing to around one third of Cryptologic's poker revenues, some analysts felt the market overreacted to the Betfair news. Cryptologic's non poker revenues remained solid, and the company will actively seek new licensees should Betfair decide to go through with it's plans.