International Game Technology Chairman T.J. Matthews recently told shareholders that the company is wooing new players and new markets during a "lull between technology cycles."
The world’s largest slot machine manufacturer saw several boom years after introducing cashless ticket technology and casinos rushed to replace their outdated coin machines, he said.
Now, the company is involved in research and development on its next generation of server-based systems — also known as downloadable slots — that allow casino operators to manage and change games and let players switch games without leaving their seats.
"IGT invested $189 million or 7.5 percent of total revenue in R&D in fiscal 2006," Matthews said at IGT’s annual meeting in Reno. "This year, we plan to invest more than $200 million in R&D, more than our next three competitors combined."
New games the company introduced over the past year, or has in the works, involve group play in which several people seek the same jackpot, including progressive ones.
"It’s not just winning, it’s having people know that you won," Matthews said.
With the decline in slot replacements, IGT reported a flat first quarter on Jan. 18, and share prices have since fallen about 15 percent.
"Our 2007 survey showed that there is tremendous interest in downloadable gaming (72 percent of slot managers said they would install the games), which shows us that it’s not so much a matter of ”˜if’ as much as it is ”˜when,’" Goldman Sachs analyst Steven Kent wrote. "Increasing realization of the downloadable opportunity is a long-term catalyst."
In the short term, Matthews said the company intends to double its earnings per share every five years, or 14 percent a year, although he conceded that would be challenging given the listless growth of the industry.
Along with adding new games, he said the domestic market had grown with the approval of gambling at race tracks in Pennsylvania, Florida and Arkansas, five casinos in Pennsylvania and efforts by tribes in California and Florida to upgrade their contracts.
Internationally, he said regulatory changes in Japan could generate the replacement of 1.5 million units by the end of September.
While the huge market in Macau is largely driven by table games, IGT is developing machines that replicate those games without requiring a dealer.