Weak quarter reported by slot maker

Friday, Oct. 26, 2001 | 9:28 a.m.

Slot machine maker WMS Industries Inc. of Chicago badly missed earnings expectations Thursday for the quarter ending Sept. 30, as net income tumbled 39 percent.

WMS posted net income of $5.8 million, or 18 cents per share; in the year-ago quarter, the company earned $9.5 million, or 30 cents per share. Analysts had expected the company to earn 33 cents per share.

Goldman Sachs responded by downgrading the stock from "market outperform" to "market perform." After a late start in trading, WMS traded at $17.68 this morning, down $1.27.

Revenues fell 22.5 percent to $46.3 million, while cash flow dropped 26 percent to $13.9 million.

The poor quarter was primarily the result of plunging machine sales -- revenues from the sale of gaming devices fell 48 percent to $20.9 million, while the number of machines sold was down 55 percent to 2,050 slots during the quarter.

This wasn't the result of the post-Sept. 11 downturn, WMS said, but the company's efforts to fix software glitches in its slots discovered earlier this year.

The glitch, discovered in June, allowed the bill acceptors of certain WMS slots to be manipulated; WMS said its sales efforts were hurt as the company focused resources on fixing the glitch in WMS slots already on casino floors.