IGT chief presides over stormy annual meeting

Gary Thompson

Monday, March 8, 1999 | 10:51 a.m.

International Game Technology Chairman Chuck Mathewson weathered a stormy annual meeting in Las Vegas Friday, fielding sharp questions from shareholders concerned over the slot maker's slumping stock price.

Mathewson acknowledged that IGT has lost market share to competitors with high-tech video gaming products, said the threat of a proposed ban on some lucrative games in Nevada is hurting the stock and predicted the company will emerge from its current travails stronger than it is today.

Mathewson said he believes that, "except for one or two" casino executives, most gaming operators don't believe the proposal to ban revenue-participation slot machines in Nevada belongs in the state Legislature.

The proposed ban is sponsored by casino operators who want to establish their own multi-site-progressive slots but want to eliminate competition from games such as Megabucks, which can offer higher jackpots.

The initial draft of the proposed legislation was originally scheduled to be introduced last week. But several casino operators who reviewed the draft objected to certain wording and a revised proposal is being prepared.

IGT executives have indicated they believe the legislation would fail to be enacted but that if it is, they will challenge it in court.

Meanwhile, Mathewson said a compromise between Reno-based IGT and casino operators is a more likely outcome.

"We had a very successful product in progressive games," he said, "and maybe we pushed it too hard in this (Nevada gaming) community, which is very important to us. We're working on this.

"It's a pricing issue. The well-informed casino companies know we have to be profitable. We will work something out to our mutual benefit."

Progressive games such as Megabucks are provided to casinos free. IGT gets a percentage of the win, providing it with a recurring revenue stream that accounts for about half the company's profits. That revenue stream is gaining importance as other slot makers capture a bigger share of the market, reducing IGT's earnings from machine sales.

"There's a piece of legislation being drafted proposing generally that participation games should be outlawed," Mathewson said. "I'm a free thinker and believe that the less government interference, the better off we are.

"I've met with every leader in the casino industry, and they aren't in favor of this. It's a high-stakes poker game."

If such a ban is enacted, Mathewson said, it could have unintended results for casino operators who assert IGT is already too big. The company supplies about 71 percent of the slot machines in domestic casinos.

"The really strange thing is that if it passes, there'll be only one big company in the slot business, and that's IGT," he said. "The rest are close to bankruptcy because you just can't make money manufacturing and selling slots these days. The other part of the business (revenue sharing) is very important to all of us."

Mathewson, a former stockbroker, said he couldn't understand Wall Street's treatment of IGT over the past several years.

"I don't know why" the stock has performed poorly, he said in response to the complaint of a shareholder who "bought the stock in 1992 and hasn't made a nickel yet."

"One reason for the collapse of the stock is the proposed legislation," the IGT chairman said. "Wall Street hates uncertainty and the analysts, to protect themselves, have downgraded IGT.

"We don't try to promote them. We think the facts are good and that when the uncertainty over the legislation goes away, they'll be back."

He also acknowledged that part of the recent downturn in IGT's stock price is attributable to the inroads made by other manufacturers such as WMS Industries, which has gained a bigger share of the domestic market with such popular games as Monopoly.

"I don't want to duck any tough questions," Mathewson said. "We're losing market share because we got behind the curve in the development of video products. And we've been disappointed in the reaction to our own 'Vision' series, but we're working on that.

"As for WMS, the only thing wrong with their machines is that we didn't make them. But we've got more talent coming into our company" to work on such new products.

"The slot game is changing," he said. "It's becoming less of a gambling game and more of an amusement game."