IGT seeks to quickly get its hands on server-based technology (UPDATED)

By Liz Benston

Tuesday, March 4, 2008 | 5:13 p.m.

In a move that could accelerate the development of the next wave of high-tech slot machines, International Game Technology is in talks to acquire a small, technology-rich competitor, Cyberview Technology, for $70 million, according to merger documents obtained by the Sun.

Officials with IGT and Cyberview, both of which are publicly traded, declined comment.

Here's what's in it for IGT: It's pursuing server-based technology which gives casinos greater control over their slot machines. Cyberview already has developed that technology.

Cyberview is seeking a manufacturing license, and Nevada regulators have nearly completed their investigation of the company's background. The company had been scheduled to appear before the Gaming Control Board Wednesday for a vote on the license application, according to the documents. That appearance has been postponed.

Because Cyberview isn't yet licensed — putting it outside the realm of state regulators — IGT would not have to receive prior regulatory approval to acquire the company, a process that could take months.

Cyberview has 135 employees, a main office in London and a satellite office in Las Vegas. The company operates about 9,000 slot machines located in thousands of betting shops across Britain. These slots are operated via centralized computer servers that control the outcome of the games. The

company has an extensive library of games that can be quickly downloaded onto the machines.

The talks come at a pivotal time for the slot machine industry, which is plowing hundreds of millions of dollars into technology similar to that used by Cyberview in Britain. This technology, called “server-based” gaming, will revolutionize casino floors by allowing bosses to quickly change game titles, denominations, maximum bets and payback percentages at the touch of

a button. Today, slot machines in Nevada and many other states are governed by computer chips embedded in each device, which makes changing games more cumbersome.

IGT received regulatory approval in Nevada last year for a server-based system that has been tested at a few properties but has yet to be widely deployed. The company, which controls an estimated 70 percent of the global slot market, recently announced it would spend more than $1 billion on research and development over the next five years in an effort to remain the market leader amid a flood of new technology.

Besides Cyberview’s server-based technology, the company controls several patents that allow for the development of arcade-like games that involve some element of skill and reward players based on their ability to work the games’ controls. This technology would require a change in state law that governs the random outcome of gambling devices and is likely years away from implementation. Yet the games are viewed as a critical way to reach younger generations who grew up playing video games and show little interest in playing slot machines.

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Updated at 5:13 p.m.: International Game Technology has issued a press release stating that the company is in "preliminary discussions" regarding a potential acquisition of Cyberview worth up to $70 million.

The parties have agreed to an exclusive negotiating period and the transaction remains subject to various terms, including approvals from both companies' boards, gaming regulators and Cyberview shareholders, according to the release.

IGT declined further comment.