Stock in slump

Thursday, July 26, 2001 | 11:08 a.m.

Heavy selling has struck the stock of International Game Technology, following negative comments about its slot machines by Station Casinos Inc. executives

On a conference call with Station investors Wednesday, company officials blamed a changeover to IGT's multi-game slots for causing a significant decline in Texas Station's business.

"The early results have been very, very disappointing at Texas Station," said Station Chief Executive Frank Fertitta III. "What we've found is the local customers do not like the multi-game platform."

Shares of IGT fell $2.94 to $50.54 Wednesday. This morning, IGT fell another $2.40 to $48.14.

Bear Stearns gaming analyst Jason Ader called the sell-off "overdone," and urged investors to buy IGT shares.

The multi-game slots are closely tied to IGT's "coinless" technology; in order to use coinless technology, casinos typically must replace older, non-compatible machines with the new multi-game slots. The coinless technology is therefore seen as a driver of IGT's replacement sales -- and Station's comments a potential warning signal that demand will be low, though Fertitta pointed out he wasn't disappointed with the coinless technology itself.

"We believe the issues expressed by Station are more property-specific than telling of greater industry trends or any level of dissatisfaction with the EZ Pay (coinless) system," Ader said. "Station could have been too aggressive in its changeover of the mix and type of slots at the property, especially given the very high frequency visitation of its customer base."

Lehman Brothers gaming analyst Joyce Minor expressed more concern, noting that MGM MIRAGE had made "lukewarm comments" about the machines, while Harrah's Entertainment Inc. made "outright anti-cashless comments."

"We view (Station's comments) as a negative for IGT since the accelerated (slot machine) replacement story is important given slowing new (slot machine) demand," Minor wrote. "Given the comments over the past week by some of its biggest casino customers regarding their interest in cashless, we remain concerned about the ability of replacement demand to substitute as the next growth driver as new unit demand subsides."