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Gaming Guru

Howard Stutz

Bally earnings 'relatively flat' in latest quarter

28 January 2010

LAS VEGAS, Nevada -- Bally Technologies said Wednesday its second-quarter earnings were relatively flat compared with a year ago.

The Las Vegas-based slot machine maker reported net income of $33.3 million, or 58 cents per share, in the quarter ended Dec. 31, compared with net income of $33.6 million, or 59 cents per share, a year earlier.

Quarterly revenues fell 8.5 percent to $213.5 million from $233.3 million.

Bally tried to sweeten the news for investors, announcing a seven-year contract extension with the New York Lottery to provide video lottery gaming terminals at the state's eight racetrack casinos.

Bally controls 51 percent of New York's video lottery market, providing 6,400 machines, which are similar to slot machines but operate through a central server.

The company did not provide a figure for the contract.

Bally Chief Executive Officer Richard Haddrill told investors the company had stayed profitable despite the challenging market. He said revenues declined because slot machine sales to American casinos were down.

"We see positive long-term trends for our business as a result of planned gaming expansion, the extended deferral of customer game capital expenditures and our upcoming product launches," Haddrill said.

As for the New York contract, Haddrill said the company, which is one of three VLT providers in the state, wants to provide machines to the Aqueduct Race Track in New York City, once the state chooses an operator.

"We look forward to building our partnership with the lottery," Haddrill said.

Before the company announced earnings, Roth Capital Markets gaming analyst Todd Eilers said Bally systems business benefited from several placements and the company shipped slot machines during the quarter to a new casino in Alabama, Aria and a Pennsylvania racino.

"We ... view Bally as the best supplier to own in the space considering its unique growth opportunity in systems combined with international expansion opportunities," Eilers told investors.

Morgan Joseph gaming analyst Justin Sebastiano expected the slot machine maker to see a quarter-over-quarter reduction in the number of slot machines sold, but the figure reflected a "dearth of new casino openings" and the lack of casinos willing to spend money replacing older games.

However, he expects casinos will spend more in 2010 on new slot machines, which would benefit Bally.

"The company continues to make great strides on the video side of the business on both the domestic and international fronts," Sebastiano said in a research note.

Bally, which reported earnings after the close of trading on the New York Stock Exchange, finished Wednesday at $42.60, down 63 cents, or 1.46 percent.