Mandalay to enter the slot industry

Monday, May 17, 2004 | 10:54 a.m.

Mandalay Resort Group, one of the casino giants of the Strip, is poised to enter the potentially lucrative slot machine manufacturing, distribution and slot route markets.

Later this week, the company will bring its proposal to the Nevada Gaming Commission in the next step of the approval process.

Meanwhile, gaming industry observers are waiting anxiously to see what the company unveils. One observer said he thinks the company is positioning itself to offer "the casino floor of the future."

Mandalay officials declined comment on the proposal until after appearing before the Gaming Commission, which meets Thursday in Las Vegas.

A Mandalay holding company, Revive Partners LLC, plans to develop new slot machine mother boards -- the processing component for slot machines -- that would be capable of running software that is more sophisticated than what the units originally were equipped with.

"They're actually developing a product that is the heart of the slot machine," said Dennis Neilander, chairman of the state Gaming Control Board, which approved a series of requests from Mandalay at its meeting earlier this month.

In testimony before the Control Board, Mandalay Vice President Steve Greathouse said the project has been developed by Mandalay subsidiary Gold Strike Aviation Inc., and Las Vegas-based Westronics Inc.

Under the company's plan, the mother boards of some of the company's older slot machine versions would be retrofitted, enabling the old machines to become equipped with more modern features, such as bill validators and coinless technology.

In addition to licensing the holding company and its officers -- Greathouse, Gregg Solomon and Glenn Wichinsky -- the Control Board approved the company's licensure as a slot machine route operator. Greathouse indicated Mandalay is considering its options but may sell or license the technology to competitors or develop revenue participation slots.

Neilander said the concept could be lucrative because it would enable Mandalay to compete with companies such as International Game Technology and Alliance Gaming.

Greathouse said about half of Mandalay Resort Group's slot machines in Las Vegas use the coinless technology, while only 33 percent to 40 percent of the machines in Laughlin and Reno have that technology, which has been warmly embraced by slot players.

Several industry observers said they are curious to hear more about Mandalay's plans.

"They're preparing themselves for the casino floor of the future," said Danny Davila, a gaming analyst with Sterne, Agee & Leach, New Orleans. "They're making themselves a more efficient systems company."

Davila said Mandalay has said publicly that it wants to develop systems to better track noncasino spending and this initiative appears to be a step beyond that. He said based on what was stated before the Control Board, the company appears to be trying to convert its vast number of slot machines to systems that track customers better and give players features that appeal to them at a fraction of the cost of new machines.

But Davila said he was skeptical about whether Mandalay would have much success selling systems to competitors.

"If you're MGM (MIRAGE), why would you buy from Mandalay?" he asked.

Marc Falcone, a gaming analyst with Deutsche Bank, New York, said little has been made public about the proposal and that he is anxious to hear more about it.

"It sounds like they hope to introduce technology without going through the traditional supplier side," he said.