Investors may have panicked prematurely, but what else is new
on the stock exchange. The recent panic was due to
BetFair's announcement they may be terminating their licensee
status with Cryptologic, whose NASDAQ stock price drastically
feel by 22% immediately afterwards. On the Toronto Stock
Exchange, Cryptologic's stock fell, but then rose again by the
end of trading.In this
situation, investors' premature caution does not go
unwarranted, for BetFair is one of Cryptologic's largest and
most profitable licensees. Wager Logic - the subsidiary
software company for Cryptologic - brings in approximately 30%
of total revenue for the hi-tech gambling software
corporation. And it is thought (although Cryptologic has
not revealed any figures) that BetFair makes up close to 25%
of the online poker business Wager Logic pulls in. A
loss of that much would correlate into a total loss of 10%
annual revenue, which Cryptologic says may only slightly
affect stock prices in 2006. According to a company
spokesperson, a loss of that much can easily be compensated by
growth in other areas, and bringing on new poker room
licensees.
As of now, it looks quite
probable that BetFair will be ending its contract with
Cryptologic, and turn to developing its own software.
Perhaps a deal will surface and manifest to save the
partnership. However, BetFair is probably looking at the
situation from an investors standpoint as well - Pay
Cryptologic licensee fees, or develop unique software at costs
that would amount to less than the licensee fees over the long
run. If anything is done at all, it may come soon.
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