BY TOM SOMACH

PartyGaming PLC, the parent company of Internet poker room Party Poker (www.partypoker.com), has announced that its annual net profits for 2006 are down a whopping 56% from what they were in 2005.

The company blamed the drop-off on U.S. anti-online gambling legislation that passed last year and forced Party Poker to abandon the U.S. market, which was most of its business.

Annual net profits for 2006 were $128 million, down $165 million or 56% from the $293 million in annual net profits the company recorded in 2005, PartyGaming officials said.

“Whilst the decision to stop accepting customers from the U.S. was a bitter blow for our business, our continuing operations have grown strongly from the lows reached in November 2006, benefiting from the rapid reorganization of our business and the acceleration of our efforts in international territories,” said PartyGaming chief executive Mitch Garber.

Translation: “We lost most of our business when we abandoned the U.S., but now we’re focusing our efforts on Europe and Asia and hope to bounce back.”

Party Poker had been the largest and most popular Internet poker room in the world.

But after the U.S. Congress passed the Unlawful Internet Gambling Enforcement Act (UIGEA) last fall, which prohibited U.S. financial institutions from doing business with online poker rooms and other online gambling sites, Party Poker left the U.S. market, laid off 945 employees (41% of its workforce) and became an also-ran in the Internet poker wars.

The U.S. market accounted for about 80% of Party Poker’s clientele.

The price of a share of PartyGaming PLC stock, which is listed on the London Stock Exchange, fell 6%, to 63 cents, upon release of the news of the company’s dismal 2006 profits.

Not all companies that abandoned the U.S. market have suffered, however.

Earlier this month, 888 Holdings LLC, the parent company of Internet poker room Pacific Poker (www.pacificpoker.com), announced that its total revenues were up 7% in 2006, compared to 2005.

888 reported that its revenues rose $19 million, from $271 million in 2005 to $290 million in 2006.

888, which also left the U.S. market after UIGEA but was able to quickly adjust, credited the revenue increase to an increased company focus in the fourth quarter of ‘06 on the European and Asian markets.

(E-mail Tom Somach at tomsomach@yahoo.com.)