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Cryptologic Under Strategic Financial Review; Possibly Going Up for Sale

28 March 2011 by admin

For those of you who have several million dollars lying around and have always wanted to own your very own software development company, keep your eyes on the moving and shaking around Cryptologic who, along with Microgaming, was one of the first to lead the way in online casino games back in the mid 1990s. Granted, the moving and shaking is on the low key end of the spectrum, meaning nothing huge and earth shattering for the creator of online casino games. But Cryptologic has stated they have reached out to an international financial advisement and consulting firm, Deloitte.

While many take this to mean that Cryptologic will be going up for sale, nothing is definite. The pioneering software developer has indeed been struggling for the last few years, reporting staggering financial losses in 2009/2010.

A press release from Cryptologic said, “This review is at an early stage and will consider a number of strategic options, including the possibility of an offer being made for the Company or a disposal of part of the business. The board wishes to stress that there can be no certainty that any offer will be forthcoming.”

Cryptologic seeking to work with Deloitte should not be seen as a negative action. The software developer is still in the process of rebuilding from financial troubles that came to a head in the summer of 2010. It was then that Brian Hadfield resigned from his position as Cryptologic’s Chief Executive Officer. A big part of his resignation was due the net losses in the 2009 fiscal year: $35.5 million.

Next up to bat as Cryptologic’s CEO was David Gavagan. Gavagan lead Cryptologic’s way as the company waded into a major financial restructuring. Part of that restructuring saw the company move the majority of its operations away from Cyprus and the United Kingdom to Malta where costs are lower. Another part of the financial restructuring saw a reduction in Cyrptologic’s workforce by close to 50%.

So far the financial restructuring is showing itself to be effective. The losses in fiscal 2010 were only $20.4 million. I know that still sounds like a lot but when you compare it to the $35.5 million in losses in 2009, the $20.4 million is not too shabby. Breaking it down in quarters shows the results even more. In the second quarter of fiscal 2010 the net losses were at $12.7 million. The fourth quarter was the first quarter which was entirely post restructuring changes (the restructuring happened during the course of the third quarter, making the fourth quarter the first that would show any results); and the fourth quarter of 2010 only revealed net losses of $0.8 million—a sharp contrast to the second quarter.

But even though the restricting is showing an improvement for the company, Cryptologic is still moving forward with the review by Deloitte. And it is because the financial restructuring is progressing well that the software developer may not wind up going for sale. Despite an offer being made for the company being mentioned, it was stated that the sale of the company is only a “possibility” and not a definite, that it may not come to an offer. Remember, Deloitte is also a financial consulting firm. It may simply be a case that Cryptologic is only trying to assess their viability and look at ways to continue to improve the company’s financial standing. Cryptologic is, after all, calling this a strategic review.

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