Chicago company scoring with Monopoly-themed slots

Tuesday, Oct. 20, 1998 | 12:28 p.m.

WMS Industries Inc. shares are up since the slot-machine maker said it would start putting its new "Monopoly" theme slots in casinos.

Gamblers love the slots, analysts say, judging from early revenue figures, and investors sense a winner for WMS.

Shares of WMS increased 3/16 to 7 15/16 Monday. Business Week reported in its Oct. 26 edition that International Game Technology of Reno is eyeing WMS as a buyout target.

IGT declined comment, Business Week said.

The WMS slot machines use images from the popular Parker Brothers board game, including lighted Monopoly boards on top of the machines and an animated "Rich Uncle Pennybags," the game's mustached and tuxedo-wearing mascot, on a screen above the slots' reels. WMS licensed the rights to Monopoly from toymaker Hasbro Inc., parent of Parker Brothers.

Gamblers in Las Vegas, amused by the new games, appear to be dropping more than $400 a day into each Monopoly slot, according to analysts. That's almost four times the industry's average. WMS shares could continue to rise as the Monopoly slots are placed in more casinos, they said.

"Everyone knows Monopoly. It has great brand recognition," said Warburg Dillon Read LLC analyst Michael Wallace, who rates WMS shares a "strong buy."

Wallace said WMS shares can reach 12 in a year on higher profits from the Monopoly slots and other unique slot machines WMS has developed.

WMS shares have risen from 4 in August when the licensing agreement with Hasbro was announced. They have more than tripled from a 52-week low of 2 1/2 in June.

Chicago-based WMS, which makes slots and pinball machines, is counting on Monopoly and other new slot machines to end its four-year losing streak.

Since 1995, when it began selling slots, it has accumulated $120 million in losses from continuing operations. It hasn't been able to distribute some of the most profitable slots it developed before 1996, when a federal court in Illinois ruled the machines violated a competitor's patent.

Also, its pinball business has been hurt by arcade game players' preference for video games over pinball.

WMS makes unusual-looking slot machines, using technology more commonly found in pinball machines, such as boards of lights that show animated images.

WMS will also benefit from the unusual arrangements it makes with the casinos that use its machines, analysts said. Rather than selling the machines to the casinos, as most slotmakers do, WMS places them free of charge to the casinos, with the agreement that it gets a share of the revenue from its machines.

Such arrangements have been pioneered in recent years by Las Vegas-based Anchor Gaming, whose slots also generate more revenue than average.

Wallace estimated that WMS could place about 1,000 Monopoly machines over the next year, which could generate about $20 million a year in revenue for WMS with little operating expense. The company's total revenue was only $35 million in its fourth fiscal quarter, ending in June.

It remains to be seen, however, if the Monopoly slots will keep gamblers' interest after their initial novelty wears off, Ladenburg, Thalmann & Co. analyst Andrew Zarnett said.

"Sometimes you find that a slot machine's revenue is very strong as people try it out," he said. "As they find out the odds aren't in their favor, then they go back to something they're used to playing."

Different versions of the Monopoly machines, with names such as "Roll & Win" and "Advance to Boardwalk," are in a few Las Vegas casinos, including the Las Vegas Hilton, the Luxor, the Mirage and the Rio. Analysts said they expected operators of other casinos to order the machines after seeing them at last month's World Gaming Congress & Expo in Las Vegas and as the machine is approved by regulators in other states.

Monopoly "is about greed. It's about money. It fits just right with gaming machines," WMS Chief Operating Officer Kevin Verner said.