HOW ARE THE MIGHTY FALLEN (Update)

27 July 2007

2006 Neteller numbers show how badly US troubles impacted the e-wallet

Whilst the weak Neteller Quarter 1 2007 numbers was the focus of attention of most analysts yesterday (Wednesday), it was the year prior to the clash with the US authorities that best served to illustrate how successful the company was before its US troubles began with the arrest of founders Lawrence and Lefebvre in the US in January this year.

Results for 2006 showed impressive gains across all business metrics, with the most significant achievements made in its global expansion. Revenue was up by 50 percent from 2005 to 2006, and the company's customer base grew more than 50 percent.

CEO Ron Martin commented: "The third quarter [2006] marked another milestone with the addition of our three millionth customer,"

He added that the active customer base was up by 29 percent to 640 701 active customers in 2006. That included 489 535 U.S. customers; 59 335 from Canada; 71 421 from Europe whilst Asia and the rest of the world contributed 20 410 to the active customer total.

The year 2007 is unlikely to match these statistics as a consquence of the e-wallet's expensive run-in with the US Department of Justice due to its popularity as a payment channel for US online gamblers. The company has withdrawn from the US, Canadian, Turkish and now Israeli markets and as a result could face a drop in income of between 70 and 75 percent.

Recognising the dangers, Neteller chairman Dale Johnson remarks: "In response to these significant challenges, the group is energetically implementing a strategy to restore its pre-eminence in providing money transfer services for the online gaming sector in selected markets outside of North American, through continued investment in product solutions and technology development."

Neteller's plan for rebuilding and bouncing back from the setbacks in the United States mainly involve expansion into other geographic areas through a number of market and user building initiatives.

By the end of 2006 the company had added 11 new countries, showed improved growth in Europe and Asia, and increased its non-North American active customers by 65 percent, so further improvements are clearly possible.

But the company will have to regain the respect and trust of customers at the player level, many of whom are disenchanted by the manner in which Neteller communicated and implemented decisions during its trials and tribulations with the US authorities. The resumption of full Neteller card services will be especially important in this regard.

Neteller stocks stumbled badly, dropping 113 points when it resumed trading on the AIM on Wednesday following a 6 month hiatus whilst the shares were suspended - the company's performance for the rest of the week will be the subject of close attention by analysts and investors alike.

CEO Martin still felt that the restoration of trade was a positive step for the company, viewing it as the start of a new chapter for Neteller following the resolution of its American hassles.

Online Casino News courtesy of InfoPowa