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Analyst: Weather and Competition Will Hurt Casino Earnings

11 January 2001

LAS VEGAS, Nevada--(Press Release)--January 11, 2001-- Unfavorable weather conditions in the midwest and the northeast, along with increased competition in key gaming markets, will likely depress earnings for many casino companies, according to Bear Stearns senior managing director and gaming, lodging & leisure analyst Jason Ader.

``There are a number of factors hindering casino earnings from the fourth quarter of 2000 into the first quarter of 2001,'' Ader said. ``Compared to strong earnings from previous years, we think it is going to be tough for most companies to post impressive numbers.'' Ader made his comments at The American Gaming Summit in Las Vegas.

Weathering A Storm:

Snow, ice and the cold weather have slowed casino visitation in many areas of the northeast and the midwest reports the Bear Stearns analyst. Regional casino markets in Illinois, Missouri, Indiana, Mississippi and Atlantic City have had difficulty drawing large numbers of gamblers. The drop off is even more significant in contrast to the prior few years, when mild winters did not pose any of the same problems.

Fighting For Each Customer:

Intensified competition has also brought earnings pressure to the gaming industry. According to Ader, markets such as Tunica and the Gulf Coast in Mississippi have become saturated. ``While some of these markets are relatively new, there are now plenty of kids on the block,'' said Ader. ``Almost everyone is there and it is making it very difficult for companies to reap huge profits.''

Vegas Is Hanging Tough:

The earnings forecast for the Las Vegas market is relatively more positive, according to Ader. A strong convention business continues to drive traffic to the strip and companies are capitalizing.

``We still like what we are seeing in Vegas,'' Ader said. ``But the city could be hurt by the fact that two enormous, revenue generating events, the Super Bowl and Chinese New Year, fall on the same weekend this year and will therefore have a limited impact on the bottom line. In prior years the casinos have enjoyed two banner weekends thanks to the events.''

Good Bets to Make:

Despite indications that earnings could be depressed in the casino industry, Ader thinks there are companies that are likely to stand out. Ader believes MGM Mirage (MGG) will be insulated from the pricing pressures that may hit other casino companies if economic conditions worsen. ``MGM caters to high end clientele and therefore their customers are more likely to spend even in tough economic times,'' Ader said.

Ader also favors gaming equipment maker International Game Technology (IGT); pointing to an accelerated replacement cycle for gaming machines, a strong order back log and an increase in orders as Native American gaming expands in California.

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