The Chips Are Down for PartyGaming

"Is online poker running out of steam?" asked John Foley on Breakingviews.com. Online gaming giant PartyGaming, which came to market as London's largest initial public offering for 5 years in June, saw shares fall 33% after first-half results disappointed investors.

Revenues grew 81%, while operating profits surged 71%, excluding flotation and share sale costs. But the group had to admit that "the market isn't growing as fast as it hoped" and it is set to miss "the optimistic forecasts" that helped drive the IPO. PartyGaming blamed the slowdown partly on the World Series of Poker tournament, which usually boosts summer earnings, being staged later this year.

But a more worrying problem is that players are spending "less time and money on its sites". The amount spent per player fell 9% year-on-year, while the proportion of new subscribers who stop playing within the first six months rose to 66% during the first half.

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"Despite the caution in these results, online gaming as whole is not a busted flush," said Lex in the FT. But it was "a wake-up call" as to PartyGaming's "narrow focus on US online poker" the site derives 94% of revenues from poker, and 86% from the States.

Despite the plunge, PartyGaming is still on track to join the blue chip FTSE 100 index this month. The latest quarterly reshuffle was based on Tuesday's closing prices. At 105p a share, the company is still worth "around £4.2bn" said Reuters, which makes it the UK's 65th largest company "comparable to the size of brewer Scottish & Newcastle".