“It’s going to be a really powerful handheld game console,” said Asbjoern Soendergaard, founder and chief executive officer of Tactile Entertainment. “It’s going to be an awesome gaming experience.”

Soendergaard’s Denmark-based company is building a pet simulation game for the iPhone called “Pocket Creatures” and he said the iPad will allow the game developers to add “features that we only thought we could a year ago.”

The iPad’s larger screen, rich graphics and processing power has videogame and application developers around the world racing to put the final touches on programs for the iPad in time for when it hits the stores next month.

Free and paid applications for the iPhone — more than 150,000 to date — helped make the smartphone a smash hit and developers are hoping for similar success with the iPad, which goes on sale in the United States on April 3 and in nine other countries at the end of the month.

“We’re very excited about the iPad because it gives us more room to play,” said Brian Meehan, the head of worldwide product development at Sourcebits, a company focused on mobile applications and gaming with offices in Atlanta and Bangalore, India.

“It’s got a larger screen obviously and more CPU,” Meehan said of the iPad’s central processing unit, what Tactile’s Soendergaard described as the “power under the hood.”

Besides games, one of Sourcebits most successful products is “Knocking Live Video,” which allows iPhone owners to share live video with each other and has attracted over 750,000 users in just three months.

“We’ll ultimately build that out for the iPad,” Meehan said.

“For gaming, the iPad’s going to be kind of in a bit of a world of its own,” he added.

“If you look at Sony’s PSP and all the other portable gaming devices they may be a little bit bigger than the iPod Touch or the iPhone but they’re all in that same size area.

“Now you have this device that’s also going to be able to connect to (the Internet),” he said. “That in itself is a big playing field for everybody in the gaming world.”

Soendergaard said the iPad is “different from the iPhone where you have your personal apps” and predicted it will be “a family device, a shared device.

“On the multi-player side it’s going to be really exciting,” he said. “Maybe you can play board games on it.”

Mike Rasmussen of Durham, North Carolina-based Republic of Fun, publisher of “Slug Wars” and other iPhone titles, agreed, saying the iPad opens up all kinds of new possibilities for game makers.

“It’s about the right size to place down on a table between four people,” said Rasmussen, whose title at Republic of Fun is “el presidente” in keeping with the name of his company.

“We’ve really started thinking about it as kind of the ultimate board game device which can create really interactive, fun, multi-player experiences for groups of people that just are not possible on a device like the iPhone.”

Game makers are not the only ones bullish about the iPad. So are financial analysts and application developers.

“We were able to demo the (iPad) at the launch event and were impressed by the gaming and e-book experience in particular,” said Ben Reitzes, an analyst at Barclays Capital.

“We found the gaming experience to be far superior to the smaller screen platforms and wouldn’t be surprised if gaming popularity turned out to be one of the gadget’s big surprises,” Reitzes said in a research note on Friday.

PointAbout, a Washington-based technology company which has built iPhone applications for the White House, the US Coast Guard and The Washington Post among others, is looking to adapt its popular AppMakr service to the iPad.

AppMakr can make iPhone applications for as little as 199 dollars and has been used to build 3,800 iPhone programs in just the six weeks since it was launched, said PointAbout co-founder and chief operating officer Daniel Odio.

“We will probably end up adding iPad into AppMakr so that people can build low-cost iPad apps,” Odio said. “I imagine it’s going to take us three to six months to do that but it is our goal.”

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Activision’s stock rose 4.5 percent in after-hours trading.

The world’s largest standalone game publisher by market value has risen above much of the turmoil in the gaming industry thanks to blockbuster titles like “Call of Duty” and its margin-friendly online game “World of Warcraft.”

Activision declared an annual dividend of 15 cents a share, and also announced a $1 billion stock buyback program.

“It shows you the strength and the confidence we have,” Chief Executive Bobby Kotick said in an interview with Reuters. Still, he said, the macroeconomic conditions hurting the video game sector have not improved.

Activision posted a net loss of $286 million, or 23 cents a share in the fiscal fourth-quarter ended December 31, versus a year-ago loss of $72 million, or 5 cents a share.

Excluding items, Activision earned 49 cents a share, beating analysts’ average estimate of 43 cents a share, according to Thomson Reuters I/B/E/S.

Revenue fell 5 percent to $1.6 billion. Non-GAAP revenue came in at $2.5 billion, better than the Wall Street estimate of $2.23 billion.

Sales in the quarter were led by the latest release in the “Call of Duty” franchise, which has sold nearly 12 million units in the world’s biggest video game markets, according to industry trackers NPD Group, GfK Chart-Track and Enterbrain.

In addition, online games like Activision’s “World of Warcraft” earn higher margins than packaged software games.

Last year was a difficult one for the video game industry, as casual gamers dialed back on their spending. Software sales slid 11 percent last year in the United States, the world’s largest market.

But many analysts expect game software to grow robustly this year over the depressed levels of 2009.

Activision, which often issues conservative targets, set a forecast for the current quarter and 2010 that was below Wall Street’s targets.

For 2010, Activision forecast non-GAAP earnings of 70 cents a share and non-GAAP revenue of $4.4 billion. That was lower than the average analyst estimate for a profit of 73 cents a share on revenue of $4.8 billion.

Shares of Santa Monica, California-based Activision closed at $10.10 on the Nasdaq and rose to $10.55 in extended trading.

(Reporting by Gabriel Madway; Editing by Robert MacMillan, Gary Hill)

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“I think 2010 is going to be the determining year,” said one senior executive of an online gaming group who asked not be named.

“I do think there’s going to be a domino effect, meaning the first deal gets everybody else to run. You don’t want to be the last one left without a partner.”

If a merger of Party and bwin were to materialize, it could cajole the likes of 888, Sportingbet and Playtech into tie-ups.

Traditional betting firms like Ladbrokes, William Hill and Paddy Power may also look to make acquisitions to boost their online presence.

Numis analyst Wyn Ellis says M&A activity across the sector is “inevitable.”

“We believe that consolidation talks are widespread across the online gaming sector and that most companies could be considered to be both potential industry consolidators and takeover targets,” he said.

Party and bwin have held early stage talks about a combination which would pair Party’s strength in online gaming with bwin’s expertise in sports betting.

Analysts say the logic behind the deal is compelling.

“Such a deal would bring Party the critical mass in sportsbook that it lacks, while for bwin, Party’s casino and poker products would provide a significant boost to its presence in these markets,” said KBC Peel Hunt analyst Nick Batram.

Daniel Stewart analyst James Hollins described the combination as “pretty epic.”

“The combination would be very strategically strong. It’s a pretty neat fit. PartyGaming is a very good poker brand. To combine that liquidity with bwin’s network would be pretty impressive,” he said.

Bwin shares have risen by over 300 percent since the beginning of 2009, boosted by ongoing merger speculation, a more favorable regulatory environment and the wider rally in Austrian shares, giving it a market value of $2.2 billion.

That compares with PartyGaming’s $1.8 billion valuation, suggesting bwin would be the senior partner in a merger.

“The fact that bwin has edged ahead in terms of market cap may mean that the deal could happen earlier rather than later,” said Cheuvreux analyst Alfred Reisenberger.

Hopes of industry consolidation and optimism over growth prospects are reflected in the companies’ valuations.

Bwin is trading at around 24.5 times forecast 2009 earnings, compared with a price-earnings ratio for the Wiener Boerse Index of 21.7. PartyGaming is trading at 19.9 times forecast 2009 earnings, compared with a price-earnings ratio of 18.5 for the FTSE All Share Index.

Bwin’s previous attempt to enter the lucrative poker market was ill-fated.

It bought Swedish poker operator Ongame in 2006 for almost half a billion euros to get a foot in the door of the United States poker market but its plan was scuppered when the United States effectively outlawed online gambling later in 2006. Bwin wrote off the entire investment in the same year.

Analysts say a number of factors have combined to make sector consolidation more likely over the next twelve months.

Most significant has been PartyGaming’s agreement with U.S. authorities which will protect it from being prosecuted over its past activities there.

Deutsche Bank analyst Richard Carter said the settlement had given the online gaming sector “significantly more certainty and confidence and has enabled the capital markets to better understand the potential exposure of other online gaming companies that operated in the U.S.”

Other online gaming companies which previously had U.S.-facing activities such as 888 and Sportingbet are also in talks with U.S. authorities with a view to reaching settlements.

The threat of retrospective action being taken against companies created enough uncertainty to derail deals such as Ladbrokes’ proposed takeover of 888 which floundered in 2007.

The easing of those fears and greater clarity over the way the industry is regulated have led to banks being more comfortable with the sector and, therefore, more willing to provide credit for deals.

(Additional reporting by Boris Groendahl; Editing by David Cowell)

($1=.7122 Euro)

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