IGT profits rise by 20 percent despite revenue decline
By Howard Stutz
LAS VEGAS, Nevada -- International Game Technology's cost-cutting efforts more than made up for reduced revenues from slower-than-expected first-quarter slot machine sales.
The Reno-based gambling equipment manufacturer saw its profit increase 20 percent in the period that ended Dec. 31, the company said Thursday.
IGT posted net income of $73.3 million in the quarter, or 25 cents a share, compared with $61.2 million, or 21 cents a share, reported a year earlier. Analysts polled by Thomson Reuters expected IGT to earn 20 cents per share.
In first quarter, companywide revenue was $515.7 million, a decline of 14 percent compared with $601.6 million a year ago due to disappointing sales. However, IGT said it cut costs by 25 percent to $375.4 million from $501.5 million.
IGT Chief Financial Officer Pat Cavanaugh told analysts the company would continue to push ahead with additional cost reductions.
"The work is never done and you can count on us to remain focused," Cavanaugh said. "The revenue number is not something we are overly proud of."
IGT Chief Executive Officer Patti Hart said the first quarter is normally one of the company's slowest three-month periods. Hart was optimistic that casino operators, after holding down spending due to the recession, would increase their capital expenditure budgets this year to replace older and out-dated slot machines.
"Our first-quarter results reflect measured progress in numerous aspects of our business, despite continued challenges in the broader marketplace," Hart said. "(We) achieved our highest operating margin in six quarters."
During the quarter, Hart said IGT shipped more replacement slot machines to North American casinos than in the prior year's quarter and deployed the company's first large-scale server-based gaming system at Aria, which opened Dec. 16.
While the system, which connects slot machines from multiple companies to a central server that offers marketing messages and game content, is just a month old, Hart told analysts it's drawing interest from other casino operators.
"We're getting good feedback from the Aria folks," Hart said.
Despite the net income jump, some on Wall Street believe IGT has a ways to go in recovering market share that it lost to it competitors.
"While IGT is making subtle strides in its turnaround and we are pleased with its progress, we continue to prefer WMS Industries and Bally Technologies," Macquarie Securities gaming analyst Joel Simkins told investors Thursday. "Our view (is) that they have greater leverage to a recovery in the replacement cycle as well as jurisdictional expansion opportunities, robust product pipelines, additional margin expansion opportunities, and room for both domestic and international market share gains."
IGT reported earnings after the close of trading on the New York Stock Exchange. Shares on the company closed at $20.20, down 11 cents, or 0.54 percent.
Hart also discussed IGT's push into the high-tech industry to fill executive positions.
On Thursday, former MTV official Gideon Bierer was named executive vice president of new media, helping the company develop slot machine content through the Internet, mobile, and social networking.
"It is important to stay ahead of market trends and continuously evolve our business," Hart said.
Since 2005, Bierer oversaw international digital media for MTV Networks and was responsible for all online and mobile businesses.
Earlier in the week, IGT named former Hewlett-Packard executive Susan Macke as chief marketing officer. Hart, who became IGT's CEO in April, spent most of her career in the technology field, holding chief executive positions with several Silicon Valley-based companies.
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