International Game quarterly profit falls 19 pct - Tuesday 12th of July 2005

Slot machine maker International Game Technology (IGT.N: Quote, Profile, Research) on Thursday said its quarterly profit fell 19 percent from continued weakness in U.S. casino demand and earnings in the coming fiscal year will fall short of estimates.

IGT shares fell $1.79, or 6.2 percent, to close at $27.21 on the New York Stock Exchange.

Net income in its fiscal third quarter ended June 30 slipped to $114.7 million, or 32 cents a share, from $141.1 million, or 38 cents a share, a year earlier.

In recent years, casinos have switched from coin-based slots to machines that issue paper tickets and International Game is waiting for the next phase of replacement orders to kick in and for gambling to be approved in new jurisidictions.

"It was a ho-hum quarter," said Aimee Marcel, an analyst at Jefferies & Co. Without a $10 million licensing fee, IGT would have earned 29 cents a share, below the average analyst estimate of 30 cents a share, she said.

Chief Executive T.J. Matthews said near-term challenges will keep quarterly earnings in the range of 30 cents per quarter through fiscal 2006, or $1.20 per share for the year, but said long-term trends in slot machine demand remain positive.

Analysts expected a profit of $1.43 a share for the fiscal year ending September 2006, according to Reuters Estimates.

IGT remains in a period of lower earnings given a tough macro environment, but positive developments in California or Florida, timely roll-outs in New York and Pennsylvania, or strong Japanese sales, could represent upside to estimates, Deutsche Bank analyst Marc Falcone said in a report.

Marcel called the $1.20 target "conservative," noting IGT said it did not include share buybacks and any potential upside from new slot machine operations in states such as Pennsylvania and Florida.

The 2006 outlook also does not include charges of 7 cents to 8 cents a share for stock options, the Reno, Nevada-based company said.

In the latest quarter, product sales fell due to lower North American replacement demand, but higher prices and increased profit from domestic sales of systems and other non-machine products helped boost per-unit revenue, said Chief Financial Officer Maureen Mullarkey.

Quarterly revenue fell 6.4 percent to $579.56 million from $618.89 million. North America product sales were down 25 percent to $182.6 million, while international product sales rose 27 percent to $91.9 million.

Matthews said the continued acceptance of gaming as entertainment -- evidenced by more liberal gambling legislation in states like New York and Pennsylvania and countries including Singapore and Britain -- bodes well for IGT in the longer term.

The CEO said the next big innovation in slot machines -- games that are downloaded from a central server -- will begin to augment the companys earnings in fiscal 2008.

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