by Hillary LaClair, Senior Editor
January 23, 2009
International Gaming Technology, or IGT, a Reno-based slots machine giant and online and mobile gaming provider, is struggling to make its goals this year – showing a 42 percent reduction in the Q4 revenue from this time last year. According to reports released on Thursday, IGT was pulling in profits of $65.7 million dollars – selling at 22 cents per share – down from $113.7 million and 36 cents per share reported in the same quarter in 2007.
Financial analysts had anticipated that stock in the online casino and slots games provider would be sold for 26 cents per share this quarter. “Results were modestly below our expectations, with revenue slightly ahead offset by lower-than-expected profitability,” said David Katz, a gaming analyst at Oppenheimer. “Overall, the quarter’s results did not suggest that we need to make any significant change to our thesis.”
Gaming analysts said that IGT had been a victim of the declining economy since before the end of last year, however. Many casinos, feeling the effects of a sloping economy, did not invest in new gaming platforms. The value of company’s stock had decreased over 80 percent in the New York Stock Exchange in 2008. Total revenue dropped 6.8 percent from last year – from $646 million to $602 million.
“While we expect continued softness in the domestic slot market, we believe management is taking proactive approach in order to maintain margins,” opined Steven Wieczynski, a gaming analyst at Stifel Nicolaus. “Cost-cutting and restructuring efforts should allow IGT to turn revenues into profits at a swifter pace once the gaming environment improves. We believe investors are putting too much emphasis on the near term and not focusing on the potential long-term growth story, which revolves around the next replacement cycle and gaming expansion.”
IGT expanded its market into the internet casino industry in 2005 when it acquired WagerWorks. WagerWorks, with IGT, supplies gaming casino software that it claims are “uniquely tailored to meet the needs of the operator.”
Last year, IGT reached into the mobile gaming market in 2008, with its purchase of Million-2-1, a cell phone gaming software provider which offers prize competitions, voting facilities, polling facilities, lotteries, call radio, call TV activities and other interactive applications.
Still, IGT Chairman and CEO, TJ Matthews, feels that the company succeeded as well as it could, given the current economic status. “This is the worst economy in decades,” he said in a conference call with gaming analysts. “We’ve completed our initial cost reduction efforts and will continue to look for more ways to save. We’ve overcome difficult conditions and significant marketplace changes in the past. I’m confident we’re going to do so again.”
The majority of gaming analysts agree with Matthews, saying that the expectations for IGT this past quarter, given the circumstances, were low. “We think there is a lot of noise in the quarter, but it is clear that business fundamentals remain weak,” said Susquehanna gaming analyst Robert LaFleur in a statement to investors.
IGT shares closed at $11.58 in the New York Stock Exchange on Thursday, showing an increase of 1 cent.