In 1998 a California porn princess commissioned a 25-year-old Indian computer wiz to write a piece of software. Trained as a lawyer, Ruth Parasol had made a small fortune in online pornography after starting, according to legend, with a couple of sex phone lines given to her by her father as an unorthodox teenage birthday present.
She had sold all her porn interests and it was time to invest the proceeds. Online gambling was the new buzz and she found a friend of a friend, Anurag Dikshit, a computer engineering graduate from the Indian Institute of Technology, to create a program for casino games such as roulette.
The extraordinary result of that meeting was seen Thursday when PartyGaming, the company they created, announced plans to float on the London stock market. Its PartyPoker Web site is the dominant force in the explosive online poker market, and the business will be valued at up to $10 billion -- only a little less than Marks and Spencer, or the combined value of British Airways and EMI.
At the top price, Dikshit (pronounced Dixit), who owns 42 percent, will be worth 2.1 billion pounds at the age of 33. Parasol, in her late 30s, and her husband, Russ DeLeon, each own 20 percent, worth 1 billion pounds apiece. Billionaire status has rarely been achieved so young or so quickly.
If the valuation seems implausible, look at the numbers. In three years PartyGaming's pre-tax profits have jumped from $5.8 million to $89.2 million to $372 million. In the first three months of this year it made $125 million, or $1.4 million a day. That works out to about $58,000 an hour.
Those statistics illustrate how poker, a game that grew on the 19th century Mississippi steamboats, is now a 24-hour global phenomenon. When players are logging off in San Francisco, they're logging on in Singapore and Sydney, and then everywhere from Stockholm to Sidcup. PartyGaming and its rivals make their money by taking a small slice -- the "rake" -- from each hand of poker they host for real money. The rake is typically only 1 percent or 2 percent of the pot, but a dollar here and a dollar there add up. More than 70,000 people regularly play simultaneously at PartyPoker, and the site has captured half the market.
Perhaps the most extraordinary part of the story is that Parasol and Dikshit were latecomers to poker. It was only in 2000, after seeing the success of the rival Paradise Poker, that they switched their focus from roulette and blackjack to poker.
PartyPoker launched with a stunt that will become a marketing legend. It announced a poker tournament with a first prize of $1 million, bigger than anything before seen on the Internet. Players would battle to qualify in small-stakes online tournaments, with the finalists competing for the cash on-board a cruise ship in the Caribbean. "We put 100 people with their partners on board to play in a live final," says Vikrant Bhargava, Dikshit's college chum from New Delhi, India, who joined as marketing director. "We said live, even though we were an online site, because that was the only way people could believe that a new company had paid out $1 million. It was good P.R."
Since 2003 American TV has fed the frenzy, showing tournaments played for multimillion prizes. PartyPoker's coup was to sign as its public face Mike Sexton, an old-time Vegas pro enjoying a second career as the Gary Lineker of U.S. televised poker. Hollywood climbed aboard, with the likes of Nicole Kidman and Ben Affleck playing in celebrity games. The number of online players mushroomed. It has enraged a fringe of moral-minded U.S. senators who would like to see the industry legislated out of existence. Stopping PartyGaming and its peers, though, looks to be an impossible mission -- these are 21st century Internet businesses that simply bypass problems of geography.
PartyGaming's head office is in Gibraltar; its computer servers run from there and from Kahnawake, a Mohawk Indian reserve in Canada; its marketing office is in London, but most of its 1,000 staff work in a call center and software development site in Hyderabad, southern India. The appeal of Gibraltar is its low taxes and gambling-friendly regulators. The online casino 888.com operates from the same building as PartyGaming, as does the online business of Ladbrokes. Kahnawake keeps the hardware out of reach of irate politicians.
Investors in London are more relaxed about putting cash into gambling. British company Sportingbet bought Paradise Poker last year and saw its share price triple; poker is the fastest-growing part of the online operations of William Hill and Ladbrokes. By contrast, old-fashioned Vegas casinos, fearful of the politicians, left the Internet wide open for newcomers.
PartyGaming's stock flotation is not yet a done deal, and its biggest problem is the virtual refusal of its main owners to talk about themselves. Dikshit, says Bhargava, is simply a shy, modest workaholic who still wears sandals to work. "He prefers to stay away from the media."
The reason for Parasol's and DeLeon's invisibility is their lack of day-to-day management involvement, according to the company, not her previous involvement in "adult entertainment." Instead, highly regarded outside directors are now in place, led by the chief executive, Richard Segal, a former boss of Odeon Cinemas, and the non-executive chairman, Michael Jackson, the chairman of the software group Sage.
But the original shareholders will be allowed to sell only 23 percent of their shares in the flotation, which means all will still be substantial investors in a large publicly traded company. Whether Dikshit, as operations director, can sustain his subterranean profile is questionable.
Bhargava, who has a stake of almost 15 percent, hints at the way in which the ride has left them breathless. "When we left university in 1994 -- and you have to remember that the Indian Institute of Technology was one of the best schools in all of India -- quite a lot of people went off to the U.S. and got involved with dot-coms," he says. "So many people wanted to do something big, but I don't think we ever thought it would be this big. But the motivation was not money. We have done well at something we enjoy doing."
To their credit, the founders are recognizing the efforts of their employees to a degree many other self-made tycoons would not. Some 5.6 percent of PartyGaming, worth $560 million at the top end of the flotation price range, will be gifted to an employee trust. All staff, from call center workers in Hyderabad to London techies, will get the chance to earn two or three times their salary in free share options over the next four years.
By then, this borderless company plans to be conquering new territories. A wired-up China, home of the world's most enthusiastic gamblers, is the view on the horizon.
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