Casino supplier International Game Technology IGT reported fourth-quarter and full-year results that showed suppressed demand for slot machines. CEO Patti Hart continued last quarter's comments, saying IGT is focused on improving the gaming experience for casino patrons. We agree that the firm need to refocus on what it does best: creating appealing gaming content. Hart seems to be righting the ship by reducing duplicative layers of management while streamlining the development process. We think the reduction of these expenses should position the company nicely for a rebound in gaming activity and demand for replacement machines. Although we think the gaming business will eventually turn up, the timing and magnitude of such a rebound is unclear as the economy continues to be on shaky ground. We anticipated a lull in the replacement cycle of gaming machines and are leaving our fair value estimate unchanged. Consolidated revenue declined 19% to $515 million because of weakness in the product sales and gaming operations lines of business. Compared with last quarter, gaming operations revenue declined almost 14% to $283 million because of lower gaming play levels and an unfavorable mix of variable-fee games the company provides to its customers. Close to 85% of IGT's installed base of gaming machines--which are leased machines where IGT earns a share of the amount wagered--are variable-fee in nature. As patrons gamble less, IGT's revenue falls in this business segment. Revenue per machine metrics continued to be near historic bottoms for the company as average revenue per unit per day fell to $50 from $60 in the year-ago quarter. On a bright note, we are encouraged to see IGT increase its installed base of machines almost 2%, thanks to demand for its premium-priced products.Product sales were hit even harder, as revenue declined 23% to $231 million. The company continues to experience weak demand for replacement machines, as shipments were down roughly 40% from the year-ago quarter. We anticipate weak demand for slot machines through the early part of 2010 as casino operators delay purchases of new machines.
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Analyst Notes
09-21-09 | 2:16PM Casino Supplier Risk Uncertainty Change
07-23-09 | 11:17AM IGT Reports 3Q Results
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