Globe & Mail:
Tropika gambles and wins
Thursday, January 21, 1999
TYLER HAMILTON
Technology Reporter
Tropika International Ltd. decided two years ago that selling its Tropi-Fun line of juices just wasn't enough to stay alive in the competitive beverage industry.
So the company did what any struggling juice company would do -- it transformed itself into an Internet firm that specializes in building gambling sites on the Web.
"The company reinvented itself," said Tropika president Ken Nason. "It went from apple juice to electronic commerce."
To date, Toronto-based Tropika has launched two Internet casinos, is on the verge of launching three more, and expects to begin creating its next three in February.
Tropika sells these casinos as prelicenced packages, meaning it creates the Web sites that support on-line operations and then licenses them in offshore jurisdictions on behalf of other companies that want to run them. Once a site is sold, Tropika gets a portion of the casino's winnings.
In its last two quarters, Tropika pulled in $5.7-million in revenue, compared with $352,000 during the same period in 1997, when it only sold juice. The company's climb to profitability helped push its stock to 13 cents from 5.5 cents after three days of over-the-counter trading on the Canadian Dealing Network. It closed Tuesday at 8.5 cents.
Tropika is not alone in its quest to cash in on Internet gambling and join the ranks of more established players like CryptoLogic Inc. of Toronto. In Canada, such public companies as Vancouver-based Starnet Communications International Inc., Cambridge, Ont.-based Go-Call Inc. and Software Gaming Corp. of Toronto are being watched by investors looking for another dominant player to emerge from penny-stock prospects.
Earlier this month, Starnet was crowned leader by RCG Research of San Francisco. The investment firm upgraded the company's stock to a "strong buy" from a "buy," sparking a 10-day feeding frenzy that carried its share price to a 52-week high of $5.34 (U.S.) from $1.81.
Frost & Sullivan, a marketing firm based in Mountain View, Calif., estimates that by 2004 Internet gambling and related software sales will be worth $7.4-billion.
In Canada alone, the potential of Internet gambling can be gauged by traditional, government-run gambling operations, which in 1997 pulled in $6.8-billion in revenue and $3.8-billion in profit, according to Statistics Canada.
"There's definitely a lot of money to be make in this market," said Brandon Osten, an analyst with Sprott Securities Ltd. in Toronto.
While Netstar's U.S. presence has won it much attention, Mr. Osten said CryptoLogic -- one of the earliest players -- is a clear-cut leader. He said the company is expected to report revenue of more than $30-million (Canadian) later this month. In October, CryptoLogic announced third-quarter revenue of $7.8-million. Its stock closed Tuesday at $15.20, up 95 cents, on the Toronto Stock Exchange.
Site seeing
cryptologic.com
tropika.com
starnet.ca
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