IGTs server-based slots Starting to be its downfall.

[Joeylc]

Competitors, and downturn dog slots leader
Ailing IGT needs to do something ‘relatively drastic,’ analyst says

If the slot machine business were like the film industry, the biggest studio with the greatest collective experience and longest string of blockbusters would be International Game Technology.

Besides offering a slew of competitive games and popular brand names, the world’s largest slot maker long benefited from competitors, who, like a group of independent filmmakers, didn’t equal the volume or variety of IGT’s products.

That has changed. Smaller companies, including Bally Technologies, WMS Gaming and Aristocrat Technologies, are catching up at IGT’s expense.

Bally, which specialized in spinning-reel machines, branched out into video slots that allow dozens of paylines instead of the traditional, single payline across the middle. WMS, among the first to sell multi-line video slots, developed traditional-looking slots with three spinning wheels. Aristocrat, which lacked machines that accept and dispense paper tickets instead of coins, eventually had a slew of products that made inroads on IGT-dominant casino floors.

The economic downturn has exacerbated IGT’s problems by putting a dent in the market for new slot machines and upgrades.




IGT, based in Reno, still has a size advantage over its competition.

Unlike the movie industry, where skillful directors, actors and writers can give a film a good shot at success, the slot business is a scatter shot process of trial and error. Slot makers often have little way of knowing whether their products will be a hit until the machines are on the casino floor. Even big names with pricey licensing deals behind them, such as Elvis and Drew Carey, can fizzle with gamblers.

As a result, companies develop hundreds of slots each year. As with movie sequels, titles that have worked in the past get new bells and whistles.

But few withstand the test of time. Casinos are constantly trying new games to lure customers back to their properties.

Those that don’t get enough play get the boot.

That makes IGT, which sells a majority of the slots in new casinos but is less successful at selling replacement machines, a victim of its own success.

But IGT also needs to sell replacements to succeed, and the casinos that bought the 510,000 or so machines now populating casino floors may see little need to replace them during the current downturn.

Casinos also have been slow to adopt so-called server-based slots. IGT has spent millions developing the technology, which, together with similar systems from other companies, is expected to revolutionize casino floors by providing huge libraries of games on demand. It will take many years for IGT, which has outspent its competitors on this front, to see a return on that investment.

Meanwhile, gamblers are dropping less into slots, making casino operators reluctant to shell out money for new technology.

In the company’s third fiscal quarter, which ended June 30, revenue declined 6 percent and profit fell 21 percent compared with the same period a year earlier while expenses rose.

Profit from the sale of machines was flat. Operational expenses were 30 percent of revenue during the quarter compared with 26 percent a year ago.

As part of a companywide restructuring, IGT’s chief operating officer, Steve Morro, is resigning, effective Sept. 27.

After missing several earnings targets, IGT’s stock hit a new low of about $20 per share last week and is down 50 percent from a year ago.

Wall Street, impatient for results, is expecting layoffs.

The company’s labor costs relative to the amount of revenue it is generating are too high, Deutsche Bank stock analyst Bill Lerner said.
“They need to do some things that are relatively drastic.�

IGT Vice President of Marketing Ed Rogich said the company views layoffs as a last resort and is exploring other cost-reduction strategies first, such as early retirement packages.

The old saying, that the person with the most toys wins in the end, is true in this business.

IGT will ultimately replace its own machines, fueling sales for years to come, and will deploy its new technology when the market is ready for it.

But Wall Street wants to see better results in the short term, especially from the team that has beaten the competition so soundly for so long.

[blueridgeslots]

Since that article was wrote (or written) IGT's stock is now around 12 bucks the 52 week low/high is 7 and 49 WOW didn't know it went that low

[brichter]

The company’s labor costs relative to the amount of revenue it is generating are too high, Deutsche Bank stock analyst Bill Lerner said.

When the analysts start talking about revenue per headcount being an issue, it's usually very bad news for employees. Happens quite a bit in the industry I'm in...

[stayouttadabunker]

Heads are gonna roll....

[Joeylc]

One segment of the industry is sure to benefit from any expansion in gaming: slot manufacturers.

However, at the moment they have other things to worry about – each other.

The ongoing slot wars have not eased, and the continued economic crisis is only serving to make the competition more intense.

IGT reported lower sales and earnings, as did Aristocrat. IGT is offering buyouts, scheduling layoffs, and promising to restructure and reduce operating expenses.

It may be too little, too late to please Wall Street. Criticism is mounting against IGT, and it is going past revenue and expenses.

Now some analysts are beginning to suggest that IGT has spent too much time and effort on server-based gaming – which to date is a non-starter.
And even more serious, some are suggesting that IGT is smoke and mirrors, claiming IGT games are just not as popular or profitable as their competitors' games.


Slot machine giant International Game Technology said Tuesday it will lay off a yet-to-be determined number of employees by Jan. 5 due to the troubled economy.

In an e-mail to employees, IGT Chairman and Chief Executive Officer TJ Matthews said the number of layoffs will be based on how many workers accept a voluntary separation program that was introduced last week. IGT spokesman Ed Rogich said roughly 500 employees, age 55 and over, were offered buyouts…IGT employs roughly 5,400 workers worldwide, including 3,000 employees at its corporate headquarters in Reno. At the company's secondary headquarters in Las Vegas, IGT employs about 1,000 workers.

IGT, the gaming industry's leading slot machine manufacturer, has hit rough times this year.

Profits are weaker than they were a year ago, the company's chief operating officer resigned earlier this month, and IGT's stock price is down more than 60 percent from its 52-week high of $49.41 on Feb. 26…

Macquarie Capital gaming analyst Joel Simkins said he was not surprised by news of the impending layoffs.

He said the slot machine maker has about 1,200 workers in engineering, an area he said could be reduced.

IGT has also spent millions on server-based gaming, which may not be introduced to casinos as quickly as hoped.

IGT spent $76 million in June to acquire a European slot machine rival as part of its server-based gaming efforts.

"MADE WITH PRIDE IN NEVADA, U.S.A.   
NOT NO MORE !!!

[stayouttadabunker]

So, IGT pretty much hit rock bottom around xmas time according to the charts?

I know NOTHING about the stock market...WMS sells each share for roughly 12 bucks more , each?

[Bettor Slots]

The ongoing slot wars have not eased, and the continued economic crisis is only serving to make the competition more intense.

IGT reported lower sales and earnings, as did Aristocrat. IGT is offering buyouts, scheduling layoffs, and promising to restructure and reduce operating expenses.

It may be too little, too late to please Wall Street. Criticism is mounting against IGT, and it is going past revenue and expenses.

All I can say is GOOD!!!  I welcome nothing else but more intense competition between the slot companies and especially for IGT as well as all companies nationwide now struggling.  Get rid of the bad and bring in the ones that really want to work...I am sick of listening to the crybabies losing their cushy jobs that they could have saved if they got off their asses 5 years ago...and I'm not just talking about IGT.  It is the foundation of the success of the States....creativity and quality driven by competition and hard work.  I have always been a defender of IGT products from the first time I sat down in front of the original Little Green Men...and said "wow" what a great idea.  But it's my opinion that IGT's output over the past 5 years has been nothing less than CRAP.  They have been "coasting" for years now and not putting anything new that is truly unique or creative.  Their policy of buying up small companies and burying their products rather than building upon their truly creative and innovative ideas is finally catching up to them...good.  Their policy of reinventing, remaking, and putting out a "Part 2" stamp on their newer games instead of coming up with something new is finally catching up to them...good.  Their policy of thinking "bigger is better", building games like the EBay and Wheel of Fortune Big Wheel albatrosses that sit more than half empty everytime I walk buy them is finally catching up to them....good...bigger is not better people.  There will be those that will continue to say "well it's the economy...the economy" and to that I say bullchit....the power of attitude and creative thinking is unstoppable.  I applaud companies like WMS that came up with a simple attractive platform and stuck with it, focusing their funds on creative thinking and down right fun to play games.  Games that people want to put their money in...games that people walk away from saying "well I lost my twenty bucks...but it sure was fun".  I hope IGT will finally learn from their mistakes.  IGT...I still support you and can only hope you can go back in time and figure out what made you great to begin with and get back to basics.

[Joeylc]

  archjds call it like you see it 

[tacman]

You're right on the money!!!! I'll play Wizard of Oz or Star Trek for a long while and LOSE but I have an enjoyable time doing it!

 Dan (tacman)

Although I do find the Indiana Jones video banks to be enjoyable as well with their bonus bank concept.

[jay]

While I don't disagree with your comments pertaining to hard word and quality output I do have somewhat of a conflicting opinion regarding the mammoth platforms.
My draw to the slots is somewhat jaded when it comes to the video slots that no longer have a slot arm, and run on a 17" LCD display.
I work on a computer all day and fundamentally I could get the same thrill playing the same games at an internet casino.
For that matter I could get more bang for my buck by randomly paypalling all my friends .....

Why I go to the casino would be to play on the unique platforms that I can't play anywhere else.
While I still think EBAY is as stupid a theme as anyone could pick for a slot..... I do appreciate the mammoth platform that I wouldn't get on my PC.
A regular 3 wheel slot can get a bit tedious at times, the units with the combined bonus games etc are cool. Again not easily replicated on my PC.

Just another analogy to this is Why Go to Vegas when I have 8 Casinos in my home town ? the short answer is to see/do/experience something that I can't get at home (ie Exploding Volcano's).

Just a comment about the Ebay slot. Everytime I see one of those dumb things I think about the brand erosion they represent. .....
IF Ebay was my brand name do I want to put out the connotation that sometimes you get lucky but the majority of the time you just lose your money ?
Now Indiana Jones......thats a slot machine.... even if the last movie sucked.

[brichter]

My draw to the slots is somewhat jaded when it comes to the video slots that no longer have a slot arm, and run on a 17" LCD display.
I work on a computer all day and fundamentally I could get the same thrill playing the same games at an internet casino.
For that matter I could get more bang for my buck by randomly paypalling all my friends .....

fubar_at_yahoo.com

 

BTW, IGT's market cap is still better than that of their competitors, I'd be interested to see their 10K when it comes out. Are they living on credit or sitting on a load of cash?

And archjds:

[Slotmaster]

http://www.rttnews.com/ArticleView.aspx?Id=831695

International Game Technology QI Profit Plunges In Tough Market - Update

Thursday, International Game Technology (IGT:  News ) reported first-quarter profit that was down 42% from last year, reflecting the on-going effects of difficult global economic conditions that have impacted both gaming operators and casino patrons.

International Game Technology is a designer and manufacturer of slot machines. The company produces video gaming, player tracking, accounting systems, video gaming terminals for state-run lotteries and accompanying monitoring systems and progressive jackpot slot-machine networks. The company also provides internet gaming services in jurisdictions where online gaming is legal.

Net income for the quarter ended December 31, 2008 was $65.7 million or $0.22 per share compared to $113.7 million or $0.36 per share in the same quarter last year. On average, 17 analysts polled by FirstCall/Thomson Financial expected the company to earn $0.27 per share. Analysts' estimates typically exclude one-time items.

The first quarter fiscal 2009 results were unfavorably impacted by a number of significant items totaling $20.4 million, after tax, or $0.07 per share. Bad debt provision, restructuring charges, investment write-downs, interest rate changes on jackpot expense are some of the items that had an unfavorable impact on the recent first quarter results.

[a69mopar]

I think that profits are down all over, I wouldn't be surprised if the casino's are keeping their machines a little longer then they were when they were making more money.
Correct me if you wish
W