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Alliance Optimistic Despite Posting Loss

29 April 2005

by Jennifer Robinson

LAS VEGAS -- Executives of Alliance Gaming Corp. of Las Vegas said Thursday they're controlling the expense side of their business in a bid for profitability, but those positive results will have to wait until the fourth quarter.

Alliance posted a loss of $6.4 million, or 13 cents per share, for the fiscal third quarter ended March 31, compared with income of $12.2 million, or 24 cents per share, in the same quarter a year ago, the company reported. Advertisement

Company executives attributed the loss to charges in the quarter totaling 20 cents per share. Write-downs included inventory obsolescence, restructuring costs and potential tax liability for the relocation of Alliance's German distribution operations.

Excluding the charges resulted in quarterly income of $3.6 million, or 7 cents per share.

Revenue increased 8 percent to $125.4 million, compared with $116.2 million in the same quarter a year ago.

"I am very pleased with our overall business progress during the third quarter," said Richard Haddrill, Alliance's president and chief executive officer. "We will continue to focus on sharpening the saw when it comes to our cost structure while at the same time investing in important growth initiatives. We expect to be profitable for the fourth quarter."

Eric Hausler, a gaming analyst with Susquehanna Financial Group, said Alliance is "still in transition."

"Revenue was slightly ahead of what we expected," Hausler said. "They're chopping wood on the expense side. But we're looking at a long-term turnaround -- many quarters is how I'd term it."

Alliance's business units include Bally Gaming and Systems, which designs, manufactures, operates and distributes slot and video machines to casinos, racinos and video-lottery programs, among others. Its best-known machines include likenesses of characters from "Saturday Night Live" and the late singer Ray Charles.

Alliance also owns the Rainbow hotel-casino in Vicksburg, Miss.

Hausler said the overall economic outlook for the gaming-equipment sector remains poor, because few new markets will come online in the near term.

He added that an additional internal issue hobbling Alliance is its lack of a strong video system -- a concern executives plan to address as they roll out the company's new Alpha video product this year.

"The key to a successful turnaround for Alliance is to have the (economic environment) pick up to help out, and to have a video product that will work, be reliable in the field and perform well," Hausler said. "So far, the Alpha tests look good, but it's still early in the cycle."

Shares in Alliance closed Thursday at $10.48, down nearly 1 percent from $10.58 a day earlier.

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