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Best of Howard Stutz

Gaming Guru

Howard Stutz

Wall Street sees pluses in Cyberview-IGT deal

6 March 2008

LAS VEGAS, Nevada -- A potential $70 million buyout of European rival Cyberview Technology by International Game Technology could give the Reno-based company a further head start over other slot machine makers in the race to bring potentially lucrative server-based gaming technology to casinos, gaming analysts said Wednesday.

The companies announced late Tuesday that executives are in preliminary discussions regarding a potential acquisition of London-based Cyberview by IGT. No timetable was given and the companies said there would not be any comment beyond Tuesday's statement.

Wall Street, however, buzzed with speculation about the potential merger. IGT, analysts said, would pick up a company that has been involved in the early stages of server-based gaming in Europe. IGT would acquire Cyberview's server-based patents and employee talent.

"The acquisition of Cyberview could further enhance and potentially speed up IGT's server-based commercial deliverables while also adding to its already-deep server-based intellectual property pool, especially as it relates to game play and networked gaming," Deutsche Bank gaming analyst Bill Lerner said. "IGT would also inherit an employee pool staffed with engineers having years of server-based gaming development experience."

Server-based gaming is considered the next wave of slot machine technology. Conceivably, server-based gaming would allow casinos to change their games and payouts more easily with slot machines from different companies linked by a central server. The technology would offer customers more game choices and better odds. Customers could choose their games and denominations much more easily.

Analysts have raised questions about how much of a casino's slot machine floor would be devoted to the new technology once it is implemented. Questions also surround the acceptance of the technology by customers.

Cyberview has American offices in Las Vegas but isn't licensed in Nevada. The company reportedly had applied for gaming licenses in Nevada, New Jersey and Pennsylvania. In addition to providing slot machines throughout Europe, Cyberview has an established fixed-odds betting terminal business in the United Kingdom.

Two years ago, Cyberview signed a deal with WMS Industries for the rights to use Cyberview's server-based gaming technology. Cyberview has the right to use some of WMS' game content outside of North America.

"We would guess that if this deal goes through, there will be many speculators out there saying this deal would bring IGT and WMS one step closer to becoming a joined entity," Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said in a note to investors Wednesday. "IGT and WMS are working together on certain server-based initiatives and this deal, in our opinion, would bring the two companies' server-based interests even tighter."

The buyout speculation didn't help IGT shares Wednesday. The stock fell $1.03, or 2.19 percent, to close at $45.98 on the New York Stock Exchange.

Goldman Sachs gaming analyst Steven Kent thought an IGT buyout of Cyberview would have several positives for IGT. He said Cyberview's timed gaming concept and its skill games would mesh with IGT's portfolio.

"This appears to be a step by IGT to continue the pace on the rollout of central server gaming in North America and should be viewed as an incremental positive for IGT shares," Kent wrote in a note to investors.