IGT Placing a Bet Outside of Its Sweet Spot
Demand for slots is slowing, so gaming manufacturers are changing strategies--and it will be worth the gamble.
The gaming manufacturing industry has faced a poor demand environment during the last several years. Sluggish consumer discretionary spending and an overleveraged client base have combined to form a fierce headwind for the space. According to our estimates, the total number of North American slot machines increased a cumulative 33% from 1999 to 2006. This growth has fallen to 14% from 2006 to 2011, and we expect this rate to move even lower during the next few years. As a result, the three major North American gaming manufacturers-- International Game Technology (IGT), WMS Industries (WMS), and Bally Technologies (BYI)--have been forced to reevaluate their competitive positions and operational strategies.
At its 2011 investor conference in New York on Dec. 7, IGT announced three major tactical initiatives related to its long-term strategy: a heavy push into untapped international markets, a more robust build-out of its online gaming infrastructure, and a new casino floor management system.
Vishnu Lekraj does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.