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Wall Street finds IGT boss's outlook too conservative

2 February 2010

LAS VEGAS, Nevada -- The honeymoon may be over between Wall Street and International Game Technology Chief Executive Officer Patti Hart.

Based on comments and observations following the company's first-quarter earnings report last month, analysts are no longer giving Hart a free pass. The longtime technology industry executive was appointed CEO of the Reno-based slot machine manufacturer in April.

IGT reported a 20 percent increase in profits for the quarter, despite a 14 percent decline in revenues. The company's slower-than-expected slot machine sales were offset by a 25 percent reduction in costs.

Wall Street was happy that IGT has reduced its expenses over the past 18 months, but the investment community believes the company is being too conservative in its projections for 2010.

Several analysts called out Hart and other IGT executives during a quarterly earnings conference call Jan. 21, especially after the company was touting the numerous products it unveiled during November's Global Gaming Expo.

Hart said IGT is taking a guarded approach to both the gaming operations business and any plans by the casino industry to adjust slot machine floors in the coming year.

The analyst community was more optimistic.

"Management seemed ultracautious with their outlook for replacement acceleration," Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said. "Their outlook now seems more guarded than what we heard from them back at G2E. While we understand the conservative approach we think management could be too cautious at this point."

Most observers, such as Goldman Sachs gaming analyst Steven Kent, believe casino operators may look to upgrade slot machine floors that have grown stale during the recession.

He thought sales figures for IGT and its competitors will pick up as a replacement cycle takes hold and gaming companies reinvest money into slot machines.

"We continue to view (IGT's) guidance as conservative, given the strong performance during the first quarter," Kent said. "While shipments to new and expanding properties will undoubtedly be down this year, we believe that replacement sales should at least be enough to offset this."

Oppenheimer gaming analyst David Katz wasn't concerned with IGT's conservative projections. He believes in the approach taken by Hart, who spent three years on the company's board of directors before becoming CEO.

"IGT should have the greatest chance among its peers of doubling earnings and prospectively its share price over the next 24 to 36 months," Katz told investors. "Our conviction is high that the fundamentals for slot suppliers should improve in 2010 through 2012, and our channel checks indicate that there are signs of recovery in IGT's product development."

Wall Street finds IGT boss's outlook too conservative is republished from Online.CasinoCity.com.