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People just aren't playing slots as much

Jul 22, 2008 7:00 PM

Earnings by Ray Poirier | In a report that was very nearly what many gaming analysts had expected, International Game Technology (IGT) said its earnings for the period that ended on June 30 had dropped to $108.3 million or $0.35 per share, down from last year’s $136.4 million or $0.42 per share.

Earnings consensus was for $0.36 per share.

The company blamed the economy and especially casino slot players for the poor showing. In fact, company officials described slot play as "unprecedented" in its decline.

Revenue for the third fiscal quarter was $677.4 million, down from $706.5 million in 2007.

And the poor economic conditions are not going to change soon, said TJ Matthews, company chairman and CEO.

"The fact is these conditions we see in the marketplace are looking like they will continue for the foreseeable future. Unprecedented. We’ve never really seen gaming play levels fall," Matthews said in a conference call following the announcement.

Still, he said, under the existing conditions the quarter was "pretty good."

For the quarter, product sales dropped to $343.8 million from $364.6 million as machine shipments fell to 20,200 down from 36,900 last year. These numbers could change dramatically should the industry move in the direction of server-based casino games and management systems, a direction that many analysts see as the future of slots activity.

While analysts at Deutsche Bank and UBS maintained their confidence in the company’s future, analysts at both Citigroup and Oppenheimer downgraded the company’s shares.

The company lowered its guidance for the rest of the year and into early 2009 from $0.35 to $0.40 per share to $0.30 to $0.35 per share.

Share price fell following the announcement, closing on Friday at $22.48.

Others due

Now that IGT has released its quarterly earnings, investors wonder whether the slot manufacturing company is setting the pattern for other gaming companies.

One of these is Wynn Resorts Ltd. (WYNN) that will report its second quarter earnings in a conference call on Thursday, July 24, at 6:30 a.m. PDT.

In a pre-announcement last week, Wynn officials indicated they were separating their approach. The Las Vegas property, they said, had a difficult quarter with operating income falling between $18 million to $22 million compared to last year’s $63.4 million.

However, the Macau gambling resort should report operating income of $100 million to $106 million, or about double the 2007 operating income for the second quarter.

Based on these expectations, plus the announcement that the company had started recruiting some 5,300 workers for the Encore property that will open in December, the share price rose some $10 each, closing on Friday at slightly more than $88.

Also reporting their second quarter experiences will be:

Dover Downs Gaming & Entertainment Inc. (DDE) on Thursday, July 24, at 6:30 a.m. PDT.

Penn National Gaming Inc. (PENN) on Thursday, July 24, at 8 a.m. PDT.

Scientific Games Corporation (SGMS) on Friday, Aug. 1, at 5:30 a.m. PDT.

Youbet.Com Inc. (UBET) on Monday, Aug. 4, at 6 a.m. PDT.

Trump Entertainment Resorts Inc. (TRMP) on Thursday, Aug. 7, at 8 a.m. PDT.

Riviera Holdings Corporation (RIV) on Thursday, Aug. 7 at 11 a.m. PDT.