The game’s afoot. By next year, legislation should be in place that will make Great Britain the world’s first G-7 country to permit legal, fully regulated Internet gaming.

And now that Calgary-based Chartwell Technology Inc. has opened a branch office in London, the profitable and debt-free public company (CWH-TSX) seems well positioned to take advantage.

“We’ve got a huge opportun- ity,” agreed Darold Parken, president and CEO of the gaming software producer. “Now it’s up to us to capitalize on it.”

Before getting down to cases, however, Parken opened a recent interview by defining terms, for the benefit of those who nurture doubts about companies that reap rewards from gambling.

Dave Olecko, Business Edge
Chartwell CEO Darold Parken displays the cellphone that incorporates Java-based software, allowing users to play games on their phone or computer.

“We are in the software business,” he said, setting the record straight. “We are not in the gambling business and we don’t know the gambling business. We wouldn’t survive in the gambling business.”

Chartwell Technology has no Canadian customers, but does develop just-for-fun gaming software for U.S. giants such as Harrahs and Motorola, which relies on the company’s Java-based products for the casino-style games on its cellphones.

But 95 per cent of company revenues come directly from Great Britain, where gambling has been a cultural cornerstone since William the Conqueror bluffed King Harold into folding his cards.

Originally an oil and gas company, Chartwell shifted gears in 1998 when it acquired a California outfit called Gateway Technology Inc., as well as a gaming software package that Gateway had licensed from Corel Corp.

Chartwell’s team of Java-savvy technical wizards rebuilt the software from scratch. And a one-time energy company hit the street as a software vendor.

“I wasn’t encumbered by any knowledge of the software business at all,” grinned Parken, who has a background in law.

But revenues really started fattening up when the Chartwell sales team landed major European customers last year. Licensed sports books such as the Gibraltar-based Victor Chandler Group bought in first. Other big players followed their lead, including Coral Eurobet, England’s third-largest string of betting shops.

“We went to these sophisticated gambling operations and said, ‘Add on our casino games as another betting option for your existing customers.’”

The Europeans responded well to Chartwell’s straightforward business model. Unlike many of their competitors, the Calgarians were not selling a so-called ‘turn-key’ solution, to include full hosting and credit-card processing services.

On the contrary, they were selling Java-based, no-download software and nothing else.

“We told them: ‘You’ve already got the hardware and infrastructure. You know how to look after your own servers. You’ve got your own IT staff. You need software and that’s all you need,’” Parken recalled.

From an investment viewpoint, market-watchers are generally bullish on the Internet gambling/entertainment industry as a whole. And Chartwell Technology has attracted particularly positive interest from analysts such as Kevin Lo, a technology specialist with Calgary’s Lightyear Capital.

Lo has slapped a “strong buy” recommendation on company shares (hovering near $3.55 a week ago), citing strength of the Chartwell management team as well as a spotless reputation among its customers and throughout the gaming industry.

“Once Britain introduces these new laws, companies that are well positioned – and Chartwell is one of them – will do well. I think they’re going to make a lot of money,” said Lo, whose research included interviews with clients, management and many of the company’s 73 employees.

Chartwell, which began trading in Toronto last May, recently recorded its sixth successive profitable quarter. So setting up shop in London seemed the only logical step.

“It was clear that’s where we needed to be. All our customers will have a presence in the U.K.,” said Parken, who hired a former Coral Eurobet COO to oversee the British operation.

While Parken believes North American jurisdictions may eventually move to legalize “remote” gambling, he’s not holding his breath. But he does expect revamped laws in Britain to work in the company’s favour.

“This bill will make a tremendous difference for us. It will make our market even larger and will attract non-gaming brands into the industry – a whole entertainment package, as opposed to purely a gambling product,” he said.

“There’ll be bingo, blackjack, ‘soft’ games, fixed-odds games . . . you bet a couple pounds and have a bit of fun.”

The company has money in the bank and a share price that’s doubled in 12 months. Lo projects a $4.80 price target for April 2005.

Equities markets are always a bit of a crapshoot. For the moment, the odds seem stacked in favour of Chartwell investors.

(Tom Keyser can be reached at tomk@businessedge.ca)