The price of International Game Technology stock plunged Thursday as fears mounted over the twin threat of slower sales and the potential impact of a bill that would ban certain slot machines in Nevada.
The opening of trading in IGT stock was delayed for 37 minutes due to an order imbalance. The stock finally opened with a 327,700-share block sale down nearly $4, or 22 percent, from Wednesday's close.
Stock of the world's largest slot maker had recovered slightly to $14.5325, off $3.75, or 20.5 percent, in early afternoon trading. It closed at $14.69, off $3.63.
The drop came after the Reno company said a slower rate of replacement sales and a bill that would prohibit revenue splitting on slot machines could result in lower earnings for fiscal 1999. Contributing to the decline was a downgrade by a prominent gaming analyst.
The proposed legislation, backed by big casino companies, would bar IGT and other slot manufacturers from sharing in the win from so-call participation games such as Megabucks.
There's been speculation the bill would be introduced in the state Legislature Friday, but late word today was that the final version is still being written.
The legislation is supported by casino companies with several properties in Nevada that want to establish their own progressive slots, but fear competition from wide-area-progressives would limit the potential of their new games.
Many smaller casino operators oppose the proposed legislation, saying it would benefit only bigger casino companies. Other opponents say the bill would stifle innovation.
IGT issued a statement saying it "is aware of legislation that ... could impact the company's earnings from its installed base of Nevada MegaJackpot games."
"It is the company's understanding that the legislation may restrict or even prohibit a gaming machine manufacturer from receiving a percentage of profits or revenue from a gaming machine placed on a casino floor in Nevada. Straight machine sales and leases would not be affected," IGT said.
"The company intends to carefully monitor and vigorously oppose any such legislation if it is introduced."
IGT also said a slower rate of replacement machine sales and uncertain timing of new casino openings "may impact the company's ability to meet analyst estimates for fiscal 1999."
The consensus per-share earnings estimate of securities analysts who follow IGT has been $1.54 for the year ending next Sept. 30. But David Anders of Credit Suisse First Boston cut his per-share projections today to $1.37 for fiscal 1999 and to $1.59 for fiscal 2000. Anders also downgraded his rating in IGT stock to "hold" from "buy."
IGT said it expects 1999 domestic machine shipments "will approximate the fiscal 1998 level of 38,000 units."
"International volumes are on track with analyst expectations with the exception of Australian machine sales, where lower volumes and market share may result in an operating loss in the company's Australian subsidiary," IGT said.
While still the dominant slot supplier, IGT has been losing market share to competitors such as WMS Industries, according to Dave Ehlers of Las Vegas Investment Advisors Inc. WMS has made inroads in the replacement market with such popular slots as Monopoly.
"There are seven major casinos openings around the country this year versus three last year and you'd expect sales to rise," Anders said. "But they aren't, so there's obviously a drop in replacement demand for IGT machines."
archive