Slot manufacturer WMS to badly miss profit projection

Tuesday, Jan. 15, 2002 | 10:46 a.m.

Slot manufacturer WMS Industries Inc. of Chicago warned investors Monday that it will badly miss earnings estimates for the quarter ending Dec. 31, as the company struggles to fix software glitches in slots installed at casinos across the nation.

WMS said it expects to report net income of 10 cents to 12 cents per share for the quarter, far lower than analyst expectations of 25 cents per share. WMS, maker of the popular Monopoly game, earned 34 cents per share in the year-ago quarter.

Revenues should come in between $46 million and $52 million, the company said, compared to $67.4 million a year ago.

The declining results were primarily caused by WMS' continuing problems with software glitches in certain slot machines that left bill validators vulnerable to manipulation, first reported by the company last April. In November, after the company had installed new software in the affected slots, some WMS machines began locking up at a greater-than-normal rate. In a few instances, the machines displayed unearned credits when reset.

This resulted in greater scrutiny from gaming regulators, slowing down the approval of WMS slot machines. As a result, some new games weren't installed during the quarter, and net win per day fell because WMS was not able to put new games on the floor.

WMS also said it saw some casino operators postpone or cancel their orders following the second reported glitch.

The company said it laid off an unspecified number of employees so it could redirect more funds toward technology and research. The company recorded a one-time charge of $1.3 million, or 3 cents per share, primarily from employee severance payments.

WMS stock fell $2.39 to $14.86 on the news this morning, a one-day drop of nearly 14 percent.