Online gaming firm 888 Holdings is glad to see the back of the FIFA World Cup as trading during July returned to historical seasonal patterns.Total operating income in the second quarter of 2010 was much the same level as the year before at $61m, but was down on the $69m of revenue in the first quarter of 2010.The business to consumer (B2C) division saw total operating income improve 6% year on year (yoy) to $52m from $48m, but total operating income in the business to business (B2B) division fell 24% to $10m from $12m, though it was 3% higher on a pro-forma basis."Trading throughout this period has been challenging, impacted by a number of factors including general online poker weakness, adverse F/X [foreign exchange] and, in relation to poker and casino, the World Cup. However, we have seen resilience in our emerging offering, especially sport throughout the World Cup, and we continue to refresh our B2C offering to attract and retain players," said Gigi Levy, chief executive officer of 888.Broker KBC Peel Hunt drew unflattering comparisons with the group's performance against that of major rival Partygaming. "The structural pressures in the poker market and lack of scale are reflected in a Q2 that saw revenues decline by 33% on Q1 and 36% on Q2 2009 - this compares to an estimated 16% at PartyGaming. Casino fared better but was still down 18% on the quarter (compared to +1% for PartyGaming)," said KBC analyst Nick Batram.On the bright side the broker noted that "there has however been an increase in first time depositors in Casino and Poker compared to June 2010. 888's Dragonfish division has also signed an agreement with Micrograme S.p.A. for the provision of a casino product to the Italian gaming market, which is a small positive for the group."The Microgame deal entails Dragonfish, 888's B2B unit, to provide a fully localised product with a broad range of games, both flash and download, including video slots, video poker, table games, branded games and a selection of Quickplay instant games such as virtual sport.Microgame is Italy's leading remote gaming service provider with more than 1.7m customer accounts and a significant market share in poker and sports betting.Panmure Gordon also offered comfort, saying the key performance indicators were "better than feared", noting that the 12% quarter on quarter decline in total operating income "compares favourably to the trend when the group issued its profit warning on 28 May."The broker welcomed the Microgame deal which it thinks "will provide a material contribution and reinforces the attractiveness of the group's diversified revenue streams."Both brokers harp on the theme of consolidation in the online gaming sector after Partygaming's tie-up with Austrian operator bwin. "As a consequence of the proposed merger between PartyGaming and BWin we believe that sector consolidation will accelerate and that 888 is well placed to benefit given its proprietary technology. However, two issues remain: the intention of its largest shareholders and the risk appetite of potential acquirers, given 888 has not reached a settlement with the US Department of Justice. Nevertheless and we retain our Buy recommendation and 80p price target," Panmure Gordon said.KBC Peel Hunt is more neutral on the shares and thinks a merger "looks imperative" for 888 "given the bottom line performance, the group could be pursuing this from a sole position of weakness." "We continue to believe that there is significant inherent value within 888 but that this is only likely to be realised upon a transformational deal. Given the need to rebuild credibility within the market this leads us to a Hold recommendation at the current point in time," KBC Peel Hunt analyst Nick Batram said. KBC's price target is 74p.