DoubleDown Casino founders leave IGT

27 January 2014

The founders of the social gaming product DoubleDown Casino have left the company, two years after it was purchased by IGT - International Game Technology.

The news follows IGT’s first-quarter earnings release, in which the slot machine giant said it could see a profit decline this year because of several “acquisition-related expenses” surrounding DoubleDown.

Trade magazine Venturebeat.com first reported the departures of DoubleDown founders Greg Enell and Cooper DuBois from IGT. Company spokesman Phil O’Shaughnessy confirmed the exits.

IGT acquired DoubleDown for roughly $500 million in February 2012. IGT paid $250 million in cash for the Seattle-based company, $85 million in retention payments over the next two years for DoubleDown’s employees, and up to $165 million over a three-year period that’s subject to certain financial targets.

Analysts criticized the transaction, saying IGT overpaid for the social gaming company. Eight months after the deal, IGT CEO Patti Hart said the transaction would eventually be viewed as “the best investment” the slot machine manufacturer ever made, behind the development of cashless gaming.

IGT shares closed Friday at $15.04 on the New York Stock Exchange, down $2.61, or 14.79 percent. Several analysts downgraded the company Friday following what they termed as “disappointing earnings.”

“We view this year as a tough one for IGT given stagnating North American slot replacements, lower year-over-year activity in new markets in the U.S., and heightened competition in its core product sales and gaming operations segment,” JP Morgan gaming analyst Joe Greff told investors.

Janney Montgomery Scott gaming analyst Brian McGill told investors the DoubleDown departures were “another negative data point for the company.” He said the founders were largely responsible for the product’s success.

“It will now be up to IGT management to fill the void that has been created by these departures,” McGill said. “It is unclear what the future holds for the two founders and at what point they could potentially compete against DoubleDown.”

But Elier Research gaming analyst Adam Krejcik didn’t believe the departure would affect IGT’s operations with DoubleDown. He said neither founder was involved in DoubleDown’s day-to-day operations.

“Both were highly compensated as a result of the acquisition and we believe it was only a matter of time before they left,” Krejcik said. “(They) rather served in more of a strategic and mentorship role. We do not expect any type of direct financial impact from their departure.”

O’Shaughnessy said IGT launched more than 50 of its games on the DoubleDown platform on both desktop and mobile computers in 2013. The platform is available in French, German, Italian and Spanish.

He said DoubleDown’s founders worked with IGT “to ensure that a strong senior leadership team is in place to continue the success of IGT’s DoubleDown.”

On Thursday, IGT said overall revenue in its interactive division increased 41 percent to $74.6 million in the quarter ended Dec. 31. Social gaming, which includes DoubleDown, contributed $64.8 million to the division’s revenue, a 57 percent increase.

IGT said DoubleDown had more than 1.7 million average daily users in the quarter, 17 percent more that in the 2013 first quarter. Players spent on average 42 cents per day on DoubleDown to buy virtual gaming tokens, a 35 percent increase from a year earlier.

McGill said IGT believes DoubleDown will succeed as it adds its content to the site. DoubleDown is Facebook’s third highest-grossing application. “The long-term success of online and social gaming is one of the bullish arguments for IGT.”

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