GigaMedia Shares Fall to New Low as Poker Slump Continues22nd December 2009 9:38 am GMT
Shares in GigaMedia Limited sank to a new 52-week low yesterday after the company finally released its long-awaited financial results for the second and third quarters of 2009, showing total revenues down 23% and 19% respectively to $37.7 million and $37.2 million, following poor contributions from the company's recently offloaded online gaming software business.
GigaMedia said that revenues from the gaming software business during the second and third quarters were negatively impacted by a number of factors including the summer seasonality, the economic downturn in Europe, as well as strong competitive pressures from poker sites operating illegally in the United States.
Second quarter revenues in the company's gaming software business fell 29% year-on-year to $26.1 million, with poker revenues suffering the biggest fall, down 36% to $17.4 million and casino revenues also falling 9% to $8.7 million.
For the third quarter, revenues from the gaming software business decreased 26% year-on-year to $25.4 million, with poker again suffering the biggest drop as revenues fell 33% to $15.8 million, while casino revenues declined 12% to $9.6 million.
The company added 34,000 new depositing real-money poker customers during the second quarter and a further 30,000 in the third quarter, with 156,000 active customers at the end of the period, down 6% quarter-on-quarter.
GigaMedia's Asian online games business contributed a further $11.7 million and $11.8 million in revenues during the second and third quarters, providing GigaMedia with total revenues of $37.7 million and $37.2 million for Q2 and Q3 2009.
Total operating costs increased marginally during the second quarter to $9.2 million, leading the company to a 28% fall in gross profit to $28.6 million. In the third quarter, operating costs were up 11% to $9.5 million, contributing to a 25% decline in gross profit to €27.7 million.
With further operating expenses of $28.2 million and $31.3 million in Q2 and Q3 respectively, GigaMedia saw net income fall to just $128,000 for the second quarter compared to $11.2 million a year ago, while the company incurred a net loss of $2.4 million for the third quarter versus a net income of $12.0 million last year.
"We faced tough market conditions and strong operating challenges in the second and third quarters in our gambling software and our Asian online games businesses - and did not respond as well as we should," said GigaMedia CEO Arthur Wang. "We were successful however in forging a powerful strategic alliance in Europe which we believe will be very value creative - and as a side benefit free up management time and financial firepower for our planned expansion in Asia."
Having also recorded a 13% revenue decline during Q1, GigaMedia looks set to post a significant drop in total 2009 revenues. Hopes are high however for a turnaround following the majority acquisition of the gaming software business last week by Mangas Gaming (more). The company warned however that it expects the challenging operating conditions of its gaming software business to continue into Q1 2010.
"We remain confident in the strategic position of our Asian online games business and intend to expand aggressively by M&A and organic growth," said President and COO Thomas Hui. "Focus on improving our pipeline, enhancing scale and strengthening execution capabilities will position us strongly to rebuild solid business momentum in 2010."
As at September 30th GigaMedia continues to maintain a healthy balance sheet with cash, cash equivalents and marketable securities of $96.3 million, down from $100.4 million on June 30th.
Shares in GigaMedia Limited (Co. Profile) (NASDAQ:GIGM) fell to a new 52-week low of $3.45 per share in trading yesterday before recovering slightly to $3.54, down 11.10% in the day.