The following article is part of The Motley Fool's "Stock Madness 2005," a contest based loosely on the annual NCAA College Basketball Tournament, a.k.a. March Madness. From March 17 to April 4, our writers and analysts will engage in head-to-head competition with each other, advocating and arguing on behalf of 64 stocks we've selected as among the most interesting to Foolish investors. You, dear readers, are the fans and referees -- you'll read these exciting duels and then vote for the stock you think is the better investment... and should therefore move on to the next round of play. The company that survives six "games" will be our tournament champion, and its writer our most valuable "coach."

But, please, make no mistake -- "Stock Madness 2005" is a GAME!

Our writers are doing this for fun. They are enjoying the spirit of competition and the art of debate. They are delighting in the search for positives in the companies they've drawn... and negatives in the companies they're pitted against. They are NOT necessarily recommending these stocks as the ones they believe in above all others. As ever, YOU must decide whether the stocks we're writing about -- winners and losers -- are deserving of your investment dollars.

Cryptologic (NASDAQ:CRYP)
Toronto, Canada
52-week low-high: $11.82-$34.96
$406 million market cap

By Bill Mann (TMF Otter)

Now this is an interesting matchup. Cryptologic, my January selection for Motley Fool Hidden Gems, is the anti-Home Depot. What makes it altogether more interesting is the thought of going up against Jeff Hwang, the bona fide poker expert here at the Fool.

We're talking about a massive company -- $84 billion in market capitalization, with 1,800 stores worldwide. It's a company with big buildings, tons of inventory, massive real estate, and brand power. It's also had to contend with an upstart rival in Lowe's (NYSE:LOW), and that has forced Home Depot to rethink some of its strategy.

Cryptologic, on the other hand, has a market capitalization of $406 million. This may be the mismatch of the tournament, with Cryptologic taking on a company more than 207 times its size. But which seems more likely to you -- that Home Depot would triple to become a $240 billion company, or that Cryptologic would triple to become a billion-dollar company? And if your answer is the former, then I have one question: "How?"

I cannot really knock Home Depot too hard. It's a great company that I owned quite recently. But Cryptologic has tapped into the poker craze (though it doesn't market in the U.S.), which shows no sign of abating any time soon, though it still makes up only 20% of Cryptologic's sales.

This company isn't a brand like Home Depot; it's a platform for the brands. These online casinos, several of which are offshoots of high-roller establishments in Great Britain, run the gamut of casino and table games, all from the Cryptologic servers. Since Cryptologic's customers are the casinos, about 95% of its revenue base is recurring. If there is a company anywhere with that kind of recurrence, I'm unaware of it.

And imagine this -- you sit down at a poker table. You speak only Japanese. The guy who sits beside you thinks he's at a completely different casino where Spanish is spoken, while the one next to him is at an entirely different place, speaking English, and thinking that he kinda likes the decor of the snappy Caribbean casino where he's brought his online grubstake.

The best part is that Cryptologic doesn't have to build a building and fill it up with millions of dollars' worth of inventory to increase sales. Each new online casino customer, each "room" of card players, is just another few bits running on the company's servers.

Bill Mann owns none of the companies mentioned in this article.

Home Depot (NYSE:HD)
Atlanta , Ga.
52-week low-high: $32.34-$44.30
$84.4 billion market cap

By Jeff Hwang


Bill Mann has argued for Cryptologic in playing poker, but how many of you have actually used an online gaming site run on Cryptologic's software? And surely, there must be a better way to play the online poker game than with Cryptologic's InterPoker, which ranks eighth on

I can think of a few better ways. There's the prospect for the IPO of Party Gaming, the parent company of Party Poker, which is by far the largest online poker room in the world. And there's WPT Enterprises (NASDAQ:WPTE), the company behind the World Poker Tour and one of my first-round picks. WPTE is set to launch its own online poker site during the second quarter, and it has the brand and the reach to vault its way toward the top couple of slots.

My previous argument for Home Depot still stands. It's the second-largest retailer in the world, and the company will continue to grow, thanks to the growing popularity of do-it-for-me service businesses, as well as expansion into Canada and Mexico. Home Depot produces reliable cash flow, pays a dividend, and buys back shares.

The bottom line is that there's a place for a company of Home Depot's type and caliber in most portfolios. And even if poker is your game, there are more relevant ways to play than with Cryptologic.

Fool contributor Jeff Hwang owns none of the companies mentioned above.

Ah, an interesting gambit from Jeff. "My argument from last time is so good that I'll just let it ride. But here's what stinks about the other guy."

There's a reason that Cryptologic isn't the best-known online poker forum -- it doesn't advertise in the U.S. at all, for the very reason that it doesn't want to replace a bunch of revenues from U.S.-based gamblers should some of our legislators make good on threats to codify making online gambling illegal.

Should this happen -- and it might -- Canada-based Cryptologic has set itself up so that the blow would be glancing, as opposed to crushing as it would most certainly be at some of its larger competitors.

I'd rebut his argument on Home Depot, but he didn't make one. -- B.M.

I feel pretty good about my argument. And I don't think that plain online gambling -- which blackjack, craps, and roulette inevitably represent -- has the same growth trajectory as online poker does. The real difference is that poker is a beatable game, leading to a popularity that builds on itself. I should also point out that ignoring the American online poker market is a big negative, since Americans make up largest online poker constituency by far. -- J.H.

Who won? Go here to cast your vote.

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