Gaming regulator annoyed at glitch

David Strow

Tuesday, Nov. 20, 2001 | 10:59 a.m.

WMS Industries Inc. said Monday it has reported "software issues" in its slot machine line to Nevada and Mississippi gaming regulators. This marks the second time in less than a year that WMS has reported software difficulties with its slots.

The report of a second problem so soon after the first is annoying a Nevada regulator. This morning, a member of the Nevada Gaming Control Board said WMS could face disciplinary action.

"It seems to be a relatively isolated problem, but following on the heels of the other problem, it gives us a great deal of concern," said Scott Scherer. "If they don't get their software operating more smoothly, I think there is the possibility of some disciplinary action."

Orrin Edidin, executive vice president and general counsel of WMS, declined to comment on the possibility of disciplinary action.

WMS confirmed the problem after Deutsche Banc Alex. Brown gaming analyst Mark Mutkoski cited it in a research report lowering WMS from "buy" to "market perform."

"Given that this represents the second time in six months that a WMS software problem has arisen that can cause a slot machine to register an improper jackpot, we think this issue is a bit more serious than the typical glitch," Mutkoski wrote. "All of the operators that we spoke with concurred that they may think twice before buying WMS products in the near future, particularly if concerns about potential malfunctions in the field persist."

Still, these concerns didn't appear to bother investors greatly this morning. By midday WMS stock was up 37 cents to $20.37.

Earlier this year WMS began fixing thousands of slot machines after a software bug was discovered that allowed bill validators on certain machines to be manipulated. Sixteen thousand slots have been fixed in Nevada and Mississippi, the company said.

Now, the fixed machines are locking up at an increased rate, WMS said -- and in a "very few reported instances," the machines display unearned credits when they are restarted. Scherer said the control board has five reports of such events.

"It's not all that uncommon (to have new problems) when you're undertaking an upgrade of this magnitude," Edidin said. "The numbers are well within expected tolerance, but given the understandable magnifying glass we're under ... we have to be particularly vigilant, to make sure we're as close to perfection as we possibly can be."

The problem isn't resulting in players actually receiving unearned credits, since a technician is always on hand when the machine is restarted.

Still, Scherer said it is a concern, because it could result in player disputes.

"I want players to feel they're getting a fair shake from any game they play in Nevada," Scherer said.