Minor Slip for IGT

With the first quarter of fiscal 2006 now officially in the books, signs point to slot machine king International Gaming Technology (NYSE: IGT) having another profitable year.  IGT was expecting much less.  The rush to exchange old-fashioned, coin-dispensing slot machines with the latest coinless breed has likely increased demand.  The company did not expect sales in the US to pick back up until the next replacement cycle.    

Despite much bleaker predictions from analysts, net income for the first quarter only slipped to $120.6 million, just 1.4%.  Lagging domestic sales were counteracted by a rise in the average price per slot machine from $12,400 to $14,500.  Domestic product revenue jumped 13.5%. 

The downside came from international sales, but only slightly.  Last year’s sale of 30,000 Terminator slot machines to Japan made it difficult to compare this year’s sales.  The rest of the international division displayed solid growth. 

IGT is master of its domain in the North American.  It dominates a strong 70% of the slot machine market.  Still, the company makes most of it profits from leasing slot machines and other higher-margin gambling operations. 

The speed at which new technology is developing has not only shortened the life span of the average slot machine, but solidified the company’s central business.  There are no competitors with a research and development budget that remotely compares to IGT’s, so the company releases an unmatched number of popular new slot machine games.  It is only a matter of time before their earning pockets are packed tight again.

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