"Taking a Major Gamble"

Possibly the fastest-growing, technology-driven business in the world is Internet gambling. Nowhere is this more evident than with the online poker company, PartlyGaming. PartlyGaming, is a company that was recently established by former porn queen Ruth Parasel, and husband Russell De Leon. Joining with them are two technology students from India, Anurag Dikeshit and Vikrant Bharagava. The company has seen remarkable growth since its early stages as demonstrated by the company’s profits. In 2002, PartlyGaming announced gross pre-tax profits of $5.8 million. By 2003, PartlyGaming’s gross profits had jumped to 89.2 million dollars. In 2004, profits had again leaped to 372 million dollars. By the end of the first quarter of 2005 alone, revenues had reached 125 million dollars. If you were to breakdown 2005’s first quarter profits by minutes, it would come break down to about 1000 dollars every minute. There are in fact, at any given moment, about 70,000 players playing at Partlypoker.com, the online poker-playing site owned by PartyGaming, sitting at its virtual poker tables. PartyPoker uses a simple revenue model to make its money. PartyPoker takes a commission (also known as a “rake” in poker jargon) off the top of the cash bet on each hand as payment for its’ providing a platform for online players to play poker using real money. This commission translates to about one percent.

PartlyGaming was first begun in1998. At this time, Parasel and De Leon sold their porn and sex chat domain to start PartlyGaming. They then hooked up with Dikeshit and Bharagava who are handling the technical and marketing aspects of the business. Dikeshit owns roughly forty percent of PartyGaming and Bhargava owns about fifteen percent. The timing for establishing PartlyGaming could not have been better. Growth in the online poker market since the time of its inception has been incredible. In 2004, the online poker market grew by a factor of about 460 percent reaching an estimated $770 million. At the present time, industry analysts are suggesting that the online gambling sector is worth in access of eight billion dollars.

PartlyGaming is rather spread out geographically. PartlyGaming is headquartered in Gibraltar, for tax purposes. The company’s servers however, are hosted on a Mohawk Indian reservation in Canada. In addition to this, its marketing office is located in London. Finally, most of PartlyGaming’s staff is employed at a call center and software development site in Hyderabad, India. If PartlyGaming’s recently announced plans to launch an IPO on the London Stock Exchange are concluded successfully, PartlyGaming’s staff members could benefit agreeably. That is because the staff is slated to be given approximately $550 million in free stock options. It is conceivable that the offering might actually yield three billion dollars in subscriptions. This would result in a valuation of ten billion dollars plus for the business.

While the growth and success of PartlyGaming is without question extraordinary, it’s continued success is certainly not guaranteed. It would appear that the principal obstacle to the company’s continued success lay in the legal arena. First, while the British government is decidedly more relaxed about Internet gambling, then the U.S., where a majority of PartlyGaming’s customers reside, the United States government is staunchly opposed to online gambling and has clearly banned the activity under the U.S. Interstate Wire Act. Secondly, since gambling is also illegal in India, although Internet gambling is not explicitly addressed, the illegal standing of gambling there puts the staff in Hyderabad at risk legally. Without question, these legal issues could have both a significant and negative affect on PartlyGaming’s upcoming IPO.