UPDATE 1-Partygaming Q2 weakens, but confident on 2008 year

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LONDON, July 8 (Reuters) - Online gaming company PartyGaming Plc (PRTY.L) reported a slightly weaker than expected financial performance in the second quarter, sending its shares lower on Tuesday, but said it was confident about prospects for 2008.

The stock was down 7.74 percent at 234.25 pence by 0715 GMT, valuing PartyGaming at around 1.98 billion pounds.

PartyGaming said its casino business performed well during the period but was offset by worse than anticipated performances in poker and sports betting, which will push overall revenues "slightly lower than expected", the company said in a trading update. The company's first-half results are due on Aug. 29.

Although revenue was down slightly due to seasonality and competition for people's leisure time from the Euro 2008 soccer tournament, EBITDA margins in the first half are expected to be substantially higher than in the comparable period in 2007, it said.

Eight analyst polled by the company estimate PartyGaming's EBITDA will come in at $156.9 million for the full year, compared with $112 million in 2007.

The strong casino performance was driven by an increase in the number of players, cross-selling from poker, the success of two new branded slot machines and the increasing popularity of bingo, PartyGaming said.

During the period the group launched "Mission:Impossible" and "Saturday Night Fever" slot machines and aims to roll out more movie-branded machines in the second half.

"We have a deal with Paramount and are launching "Top Gun" and "Godfather" machines next and will also be announcing a tie-up with another movie studio in due course," PartyGaming's John Shepherd told Reuters on Tuesday.

The group's poker business suffered after it cut the cost of its loyalty scheme, while strong competition, particularly from poker sites that accept U.S. players, led to an increase in bonuses and costs associated with some of Party's poker tournaments in the period, it said.

In sports betting, the group said Euro 2008 saw a marked increase in betting volume, but a poor run of results at the start of the tournament hit the gross win margin.

"In the group stages of Euro 2008 a run of results went with the favourites but there were a few more shocks in the knock-out rounds. Betting volumes were very high though," said Shepherd.

PartyGaming is currently in talks with U.S. authorities to find out whether it could face prosecution for taking bets in the United States before last year's effective ban on Internet gambling.

"There is no update on the U.S. situation at the moment," said Shepherd.

The full-year result will be impacted by a $4 million one-off charge associated with the replacement of former Chief Executive Mitch Garber incurred in the first half. However, the company said it "remains confident about the group's prospects for the full-year." (Reporting by Rhys Jones; Editing by Quentin Bryar)