Saturday, January 15, 2005
Copyright © Las Vegas Review-Journal

IGT agrees to joint venture

Partners will serve lotteries operated by governments

Reno-based International Game Technology, the industry's largest slot machine builder, agreed Friday to join a leading lottery operator to jointly provide products to the growing government-run gaming market.

The financial terms of the alliance weren't disclosed, but the deal with Scientific Games of New York allows IGT to place its systems products for accounting, customer management, secondary jackpot bonusing and ticket in-ticket out on gaming equipment used for government-run lotteries and pari-mutuel wagering games.

IGT and Scientific Games shortly will jointly submit a proposal to state of Louisiana officials to provide a central monitoring system for the state's lottery.

"Video lottery games are growing, especially in such places (as) Canada," IGT spokesman Ed Rogich said. "A strategic alliance with a leading lottery company like Scientific Games allows us to broaden our customer base."

The transaction reacquaints IGT with Scientific Games, which is considered a top-tiered lottery operator. In 2003 Scientific Games purchased IGT's lottery division, including the management contracts and related products, for $143 million. The division, formerly known as AWI, had been part of IGT's buyout of competitor Anchor Gaming.

Scientific Games, which vies with Gtech Holdings in the competitive lottery market, manages 16 U.S. state lotteries and others in the Caribbean, Korea, Norway, Switzerland and Shanghai, China. The company provides support for video lottery systems in Delaware, South Dakota, New Mexico, Quebec, Iceland and Australia. Recently, Scientific Games was awarded the central monitoring systems contract for Maine.

Deutsche Bank gaming analyst Marc Falcone said that because IGT sold its online lottery system to Scientific Games, the company has a built-in understanding of its partner's technological capabilities.

"This strategic alliance should enhance the two companies' relative competitive positions with respect to other competitors in central systems procurements," Falcone said. "We believe this is another indication signaling IGT's recognition of the significance of the systems business as the industry moves toward central server-based gaming."

The announcement comes as IGT prepares to report quarterly earnings Thursday morning. In a survey of gaming analysts, Thomson First Call expects the company to report relatively flat earnings compared with a year ago.

"We don't expect the company to deviate much from its original guidance or the consensus estimate this quarter," Goldman Sachs analyst Steve Kent said. "The key variable this quarter will be the international business, which may help make up for any slowdown in replacement sales, and potentially could be a source of upsides to estimates."

IGT shares fell 5 cents, or 0.15 percent, Friday to close at $33.43 on the New York Stock Exchange.