UPDATE 2-PartyGaming eyes return to US as Q1 revenue jumps

* Says in preliminary talks over M&A opportunities

* In talks with U.S. operators over partnership deals

* Q1 revenue up 27 pct to $127.1 million

* Poker hit by competition from U.S.

* Shares down 1.6 percent

(Adds CEO, analyst comment, shares)

By Matt Scuffham

LONDON, May 6 (BestGrowthStock) – Online gambling group PartyGaming
(PRTY.L: ) said it was gearing up for a possible return to the
United States if legislation banning the industry is overturned,
after reporting a 27 percent rise in first quarter revenue.

PartyGaming, which operates the PartyPoker and PartyCasino
sites, said it was encouraged by congressmen Barney Frank and
Jim McDermott’s moves to push through a new bill to regulate
online gambling which was made illegal in the United States in
2006.

Chief Executive Jim Ryan told reporters the most likely
initial move by U.S. authorities would be to legalise online
poker, seen as a game of skill, which could in time lead to
other forms of online gambling being allowed.
“We are seeing increased momentum towards regulating online
poker. It’s possible that it could happen this year and we’re
prepared if it does,” Ryan said on a conference call.

Ryan said PartyGaming had set up an operation in Los
Angeles with 38 staff and was in talks over possible
business-to-business deals with U.S. operators.

“We’ve got any number of U.S. operators who we’re talking to
right now about providing them with online gaming services and
software. That gives us good reason to think that regulation
isn’t that far way,” he said.

Rival 888’s (888.L: ) Chief Executive Gigi Levy said last
month he expected changes to online gaming laws in the U.S. to
be implemented in the coming months. [ID:nWLA2613]

Analysts say the online gaming industry is ripe for
consolidation and PartyGaming is reported to have held talks
with Austria’s bwin (BWIN.VI: ) over a possible combination.
[ID:nLDE5BT1CA] [ID:nLDE63F1BF]

“We are actively working on various opportunities.
Discussions are at a preliminary stage with those that we are
talking to,” said Ryan, who declined to confirm whether the
company was in talks with bwin.

PartyGaming reported first-quarter gross revenue of $127.1
million, benefiting from growth in its casino, bingo and sports
betting divisions.
However, revenue from the group’s poker offering declined
because of competition from websites continuing to take bets
from U.S.-based gamblers illegally.

QUIETER PERIOD

PartyGaming said its average daily revenue had slowed in the
second quarter which is traditionally a quieter period for the
industry and were down between 6 and 7 percent on the average
for the previous quarter.

The company also said it had signed a business-to-business
deal with Aviation Club de France which will join its French
poker network. France made certain kinds of online gambling
legal in April. [ID:nLDE63D0M5]

Shares in PartyGaming were down 1.6 percent to 280.4 pence
at 1023 GMT. The shares have lost 15 percent of their value over
the last month reflecting disappointment over the lack of
developments on the M&A front and the read-across from a weak
trading statement from rival 888.

“None of these factors detract from the long-term
attractions of PartyGaming as a leading player in a global
growth market. Therefore, we view the recent share price
weakness as a buying opportunity,” said KBC Peel Hunt analyst
Nick Batram.
Penny Stocks

(Editing by Paul Sandle, Mike Nesbit)

UPDATE 2-PartyGaming eyes return to US as Q1 revenue jumps