With fewer fireworks than rivals, Bally Technologies fares fine

Sorry, Bally Technologies. You guys are boring.

Back in January, the Las Vegas-based slot machine manufacturer announced record second-quarter results for revenues and earnings per share.

Bally said replacement sales of new slot machines were up year over year for the seventh consecutive quarter while new game titles based on NASCAR and the Las Vegas reality television series “Pawn Stars” were making their way into casinos worldwide.

Bally even replaced longtime Chief Executive Officer Richard Haddrill with Ramesh Srinivasan without much fanfare or attention-grabbing headlines. Haddrill became the company’s chairman.

But you’re dull compared to your gaming equipment manufacturing rivals.

International Game Technology is in the midst of a massive proxy fight pitting its former chairman and an analyst-turned-investor with the current board and management.

WMS Industries announced in January it was being sold to lottery equipment manufacturer Scientific Games for $1.5 billion. The deal is expected to close by year’s end.

Bally and WMS were considered the second and third ranked slot machine manufacturer behind IGT.

Even Australian-based Aristocrat Leisure Ltd. got in on the action, hiring IGT’s longtime top game developer to help the slot maker revamp its American operations.

All this drama away from the company’s headquarters on South Bermuda Road near McCarran International Airport makes Bally boring.

Not so, says Stifel Nicolaus gaming analyst Steven Wieczynski.

He recently held several investor meetings with Bally’s management.

Wieczynski told investors in a report following the meetings that Bally “clearly has all three business segments (slot machines, systems and online gaming) moving in the right direction.”

Wieczynski said there was much discussion surrounding the WMS purchase by Scientific Games. The deal, ironically, was announced the same day Bally reported second-quarter results. The earnings were completely overshadowed.

Bally management told Wieczynski the gaming manufacturing sector “has been ripe for acquisitions.” But, there now might be a “wait-and-see type approach” before other deals are struck.

Wieczynski believes the WMS sale helps Bally.

“The deal could bring some near-term opportunities to Bally,” Wieczynski said, “as operators might delay purchases of WMS’ products until the deal is closed and they fully understand the direction WMS will be heading.”

For now, Wieczynski said he is watching Bally’s recent movement into the slot machine market segment where the company shares revenues with casinos on certain games.

The initial games Bally launched into that market were themed with the music from the movie “Grease” and singer Michael Jackson.

“Unlike some of their competitors, Bally remains better positioned to weather softness in any of their business segments, given their well diversified business model,” Wieczynski said.

As for online gaming, the company has been approved as a provider of interactive gaming equipment in Nevada and is expected to apply for a similar license in New Jersey, once the process becomes clearer.

Wieczynski said the company’s biggest concern is not getting into competition with its casino customers.

“Bally management still isn’t sold that online gaming will be profitable so they are cautious about allocating too much capital at this point until there is more clarity,” Wieczynski said.

During the second-quarter earnings announcement, Srinivasan said Bally had several revenue-producing opportunities in the coming quarters, including sales of slot machines into Canadian lotteries and the sales into casinos of new game titles that were unveiled during last year’s Global Gaming Expo in Las Vegas.

“I am happy with Bally’s trajectory and the steadily increasing visibility we have into our near- and long-term future growth,” Srinivasan said.

Maybe that isn’t so boring.