Two of the well known bingo software providers released numbers last week which showed that online bingo has had its own problems
Parlay Entertainmnets one of the inovative leaders in the online gaming software will be known to players at sites such as BingoMania, AstroCard, BingoCArd, RehabBingo, BingoTide and many more. While 2008 resulted in a net income of $0.5 million, 2009 resulted in a net loss of $1.4 million.

888 the British online gaming company, which runs online casino, bingo and poker websites, said last week that daily average revenue in the first 25 days of the second quarter was 13 percent below the first-quarter average, partly reflecting seasonal trading patterns.

The company had reported first quarter business-to-consumer total operating income up 30% on the previous year to $59 million. "While Q1 saw improvement on a year-on-year basis, B2C trading remains challenging across our product range," Chief Executive Gigi Levy commented.

"We believe that the right steps are being taken to counter the current challenges we face and the board remains confident in 888's strategy," Levy said.

Springboard for the future for Parlay

Parlay's Chief Executive Officer, Scott White added; "Given the significant consolidation in the online bingo sector, and the fact that some of our customers were part of that consolidation, timing was such that our business model could be expanded allowing us to move into the business of operating gaming platforms. Throughout 2009 we invested significant financial and human capital resources in the development of our Alderney and North American gaming platforms, which operate under the brand Parlay Games Services. Although these platforms are accelerating in terms of growth today, we generated very little return from this significant investment in 2009, resulting in a substantial loss and cash burn."

"With 2009 as our reformulation year," concluded Mr. White "we are pleased to report that we have in excess of 40 networked partner sites, which are either launched or launching within PGS. We have numerous prospective partner arrangements in various stages of development. With the market changing again because of additional consolidation, we are now in a unique position to offer services to various customers who are searching for new solutions in the bingo vertical. With a revised cost structure and a robust and envied technology platform, it will be our intention to supplement our traditional software licensing model throughout 2010 with the growth of PGS throughout the world. As we have outlined previously, our offering will be flexible and unique, fostering customer access into multiple software technologies offering multiple software vendors, both gaming and non-gaming products and multiple languages and currencies"

Parlay has a number of technology solutions available to customers including its award winning software and the Parlay Game Services (PGS) managed solutions in Alderney and North America. PGS includes hosting services, shared games. Some of the world's best known brands use Parlay solutions. The company was debt free, with a cash reserves of $1.1 million as of 31st December 2009, leaving it well placed going forwards. 888 also has a strong financial position with net cash of $93 million, which analyst predict puts it in a strong position for future M&A opportunities. It is apparently in advanced talks about a couple of bolt-on acquisitions.

While Parlay is clearly suggesting that the loss is down to investing in the future, the competition within the online gaming sector is clearly damaging profits and the majority of good news in the accounting statements of related to companies last year was due to acquisitions rather than growth. Lets hope the company is right in its statements otherwise it is likely to become a 'cheap' takeover target of either 888 or Party Bingo in the coming years

Not so promising however at 888

The company has started a programme of cost cutting accross the group, however with the 13% reduction in daily average revenues, disappointing results in poker, casino and bingo this might not be enough to keep investors happy. Analysts in the city seem somewhat concerned about the future of the gaming markets. Nick Batram at KBC Peel Hunt has cut his recommendation to hold previous advising clients to buy shares into the company. He commented:

"Current daily revenues are down 13% against the previous quarter with no product area escaping. Poker is clearly a major problem and management does not believe this is unique to 888.

Our previous buy stance was based on a belief that 888 was a valuable asset in a consolidating market place. We continue to hold this view (indeed, a deal is perhaps more likely now) but clearly the price will come under pressure today and the market will want to see evidence that the cost savings are coming through. Although we have left our EBITDA number unchanged we recognise the increased risk to forecast are have reduced our target price to 98p (from 123p) and moved our recommendation to hold."