High-flying IGT warms up for its encores
April 26, 2004
After posting a 20 percent increase in revenues and a 32 percent increase in sales during the just-completed quarter, executives of Reno’s International Game Technology now face the obvious question: What will you do for an encore?
The current boom still has legs to carry it through the next couple of years, IGT executives told analysts next week, and they see further opportunities all over the world.
The rapid conversion of U.S.
casinos to ticket-in, ticket-out technology reducing the cash handled by casino operators still has a ways to go.
TJ Matthews, the company’s chief executive officer, estimated that about half the 740,000 slot machines in North America have been upgraded to ticket-in, ticket-out and other new technologies.
Even if some of the remaining 370,000 machines never are upgraded, IGT figures it has a lot of work left.
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By far the largest maker of gaming machines in the world, IGT sold 27,200 machines into domestic markets in the quarter ended March 31.
That figure, a quarterly record, compares with 19,800 machines in the comparable quarter a year ago.
IGT said 23,400 of those sales were replacement machines.
New sales also will continue to play a key role.
Last week, IGT said it struck a deal with Station Casinos, which will purchase of 2,100 new machines for the Red Rock Station casino scheduled to open in late 2005 or early 2006 in southern Nevada.
The higher sales volumes, in turn, translate into greater efficiencies at IGT’s plant in south Reno.
The company, the largest manufacturing outfit in the state, said gross profit margins on its gaming machines improved to 53 percent in just-completed quarter compared with 48 percent a year earlier.
Important as the boom in replacement sales may be today, it won’t last forever.To fuel future growth, IGT executives said they’re looking at international markets as well as new developments in the United States.
Internationally, the company is focusing a fair amount of attention on Japan, where IGT in the last six months has sold more than 18,000 units of a gaming machine called a pachisuro game.
It’s looking to boost its presence by a partnership with Sammy Corp., a Japanese manufacturer of pachisuro machines.
“We’re happy with what’s been happening in Japan,” said Tom Baker, the chairman of IGT’s board.
Baker, however, dampened enthusiasm about the potential for IGT if either Poland or Italy should follow through with proposals for more gaming.
“They’re huge opportunities,” he said.
“And huge opportunities come and go.”
Closer to home, the company sees strong potential in the so-called “Class II” market for gaming machines.
Those are sold to Indian casinos in states that allow bingo-like games instead of traditional slot machines.
The Class II machines made by IGT look something like slots, but their results are driven, bingo-like, from a central location.
If nothing else, Matthews said, the advent of Class II devices begins to open the discussion about gaming in some states Texas, for instance which historically have been closed to everything but bingo.
The discussion, he said, goes something like this: If bingo is allowed, and if electronic forms of bingo are allowed, what’s so different about a slot-like machine that runs in much the same way as a bingo game?
For the quarter, IGT posted net income of $116.9 million on revenues of $636.1 million.
That compares with net of $87.1 million on revenues of $254.5 million in the comparable quarter a year earlier.