Viewpoint: the Harrah's-Dragonfish tie vindicates 888's strategy
Dragonfish's business-to-business tie with US casino giant Harrah's vindicates 888 chief executive Gigi Levy's strategy on both sides of the Atlantic, argues Nick Batram, leisure analyst at brokers KBC Peel Hunt.
FROM A STOCK MARKET PERSPECTIVE, the decision of Harrah’s Interactive Entertainment (HIE) to choose Dragonfish as its technology and gaming services supplier was a potentially transforming event for 888.
Gigi Levy and his team have delivered a major strategic deal at a time when the pressure was on to do so.
Harrah’s is not only one of the world’s pre-eminent land-based gaming companies but in Mitch Garber, its interactive division is run by a man who knows the online gaming industry inside out.
It was therefore not surprising that Harrah’s choice of partner was eagerly awaited by both the industry and financial markets alike.
For 888, the benefits of the deal go far beyond the short-term impact on the bottom line.
Firstly, it is a major vindication of the group’s B2B strategy.
888 has continued to invest in its B2B business at a time when it could have cut back in order to protect short-term profitability.
The investment has clearly borne fruit with the Harrah’s deal showing that Dragonfish has a high-quality technology and services proposition that can compete with the best (888 faced stiff competition for the Harrah’s contract).
Equally important, by going with 888, Harrah’s appears to show that operators can compete with pure software providers such as Playtech, addressing the important question of conflicts of interest.
Then there is the matter of the US.
As a land-based operator in the US, Harrah’s is extremely sensitive about who it does business with.
Therefore, Harrah’s appears to be saying that it has no issue with 888’s lack of settlement with the Department of Justice.
Furthermore, by partnering with Harrah’s, 888 has put itself in pole position should the US legalise online gaming.
888’s share price rose 15% on the day of the announcement.
With an active pipeline and Harrah’s as a signature client, the recent share price strength could have a lot further to run.
This article first appeared in the October issue of eGaming Review.
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