IGT: Markets difficult, but new technology on horizon

Business at International Game Technology won't be anything to write home about for the next year or so, but the company's top executive says some of the company's push into dramatic new technology will begin to come to life in coming months.

North American sales of slot machines from the Reno-based company were down sharply in the quarter ended Sept.

30 to 10,200 units from 20,200 a year earlier and TJ Matthews, the chairman and chief executive officer of IGT cautioned investors that there's no reason to think domestic sales will perk up in the next year.

International sales volume was up to 29,700 units in the most recent quarter from 12,300 a year earlier.

Those games, however, don't generate nearly the same revenue as the domestic market.

IGT says a slot machine sold into Japan, Southeast Asia, Russia or other markets generates average revenue of $4,700 compared with $15,800 for a machine sold in North America.

And even though states from New York to Arkansas probably will be buying more slots, Matthews said those sales probably won't materialize until 2007.

But Matthews' team doesn't believe that IGT's future lies in boxes.

Instead, they're remaking the company as a provider of software systems.

A key piece of that strategy,Matthews said last week, is IGT's willingness to pay $90 million this summer for WagerWorks, a company that develops Internet gaming systems and games.

IGT's library of games provides an immediate boost to WagerWorks,Matthews said, and the Reno company thinks that WagerWorks' technology has promise to deliver gaming through mobile devices, interactive television or other systems.

"We found ourselves late to this market," Matthews acknowledged."We have the potential to expand our product offerings in a hurry."

An IGT initiative to bring big changes to the way that casinos operate their slot floors, meanwhile, probably will begin limited testing in the next year.

The company is developing centralized systems that allow casinos to instantaneously change the game or the payout at individual slot machines over a computer network.

Matthews acknowledged some questions remain to be answered, such as how the payout could be changed if a player is in mid-session on a machine, and he said nothing big is likely to happen with the new system for at least a year.

And even if the system works,Matthews said the company doesn't yet know its financial significance.

The company's earnings of $105.4 million on revenues of $607.6 million in the quarter ended Sept.

30 compares with earnings of $54.3 million on revenues of $621.7 million.

Last year's earnings were depressed, however, by a one-time $77 million charge for early redemption of some debt.