Gtech stock falls on woes in Brazil, Puerto Rico

Thursday, May 13, 2004 | 9 a.m.

BLOOMBERG NEWS

WEST GREENWICH, R.I. -- Gtech Holdings Corp., the world's biggest supplier of online lottery systems, Wednesday said a customer in Puerto Rico won't renew its contract when the current agreement expires in March 2005. The shares fell 7.6 percent.

Gtech, which provides equipment and services to 70 percent of lotteries run worldwide, also said its operations in Brazil are the target of an informal investigation by the U.S. Securities and Exchange Commission.

The decision by Loteria Electronica de Puerto Rico to find a new vendor will mean the loss of about $20 million in revenue a year, Gtech spokesman Robert Vincent said in a telephone interview. West Greenwich-based Gtech was the original provider of equipment and services to the Puerto Rican lottery when it was set up in 1990.

"Sometimes we are disappointed," Vincent said. "The Puerto Rican contract went out to bid and sometimes you lose a customer. It's a competitive bidding process."

Gtech shares fell $4.36 to $52.95 in New York Stock Exchange composite trading, after earlier sinking as low as $49.80. The shares have risen 51 percent in the past year, and 7 percent this year.

Gtech's contracts to provide services to Caixa Economica Federal, a Brazilian bank and operator of Brazil's national lottery, are under scrutiny by regulators in Brazil as well as the SEC, Gtech said in a filing.

In March federal attorneys with Brazil's Public Ministry recommended that criminal charges be brought against nine people, including Gtech and Caixa executives, the filing said. The charges focus on allegations of wrongdoing during negotiations for a contract extension last year, Gtech said.

Gtech "hasn't been charged and can't be charged under Brazilian law," Vincent said. "We want to stay in Brazil and have invested around $230 million to create the business there and want to continue."