Alliance Gaming posts loss for quarter

Thursday, Oct. 21, 2004 | 10:59 a.m.

Slowed by the integration of its new technological assets and adjustments to hiring a new top executive, Las Vegas-based Alliance Gaming Corp. today announced a 21-cent-per-share loss in its fiscal 2005 first quarter.

The loss was below analysts' expectations with the average estimate of 13 analysts surveyed by First Call projecting a loss of 11 cents a share.

The company reported a loss of $10.8 million for the quarter on revenue of $116.9 million. In the same quarter a year earlier, Alliance reported earnings of $6 million, or 12 cents a share, on revenue of $101.2 million.

Executives with the nation's No. 2 slot machine and gaming systems manufacturer in a conference call this morning expressed regret that the quarter did not meet their expectations, but also were optimistic that the company is working through its transition.

"We're obviously disappointed with the quarter," said Richard Haddrill, president and chief executive officer, who took over that post on Oct. 1 after being named to the position in July. "But this is a company that has been dramatically transformed in the past few months."

Haddrill, who had served on Alliance's board of directors since April 2003, was chief executive of the software company Manhattan Associates Inc.

In addition to the executive transition, Alliance officials said the company is adjusting to changes involving its acquisition in March of Sierra Design Group, a Reno-based electronic gaming development company. Sierra has had a strong relationship with several tribal operations and is a supplier to operations in the expanding New York market.

The company did not break out Sierra's contribution to revenue and earnings for the quarter.

Haddrill said today "the engine is moving in the right direction" and while Alliance has lost ground competitively to giant rival International Game Technology, Reno, he is enthused that the company's products were met warmly at this month's Global Gaming Expo trade show in Las Vegas. He said the company is working to solve customer satisfaction issues brought upon by stretching its engineering department too thinly.

But a gaming analyst who follows the company isn't quite as optimistic.

Marc Falcone, an analyst for Deutsche Bank, in a note to investors today, pointed out that the company took several charges as a result of its restructuring efforts, including $1.4 million for a workforce reduction and a $3 million inventory write-down on obsolete products.

The company also wrote off a bad debt of $1 million.

"At this point, we believe Mr. Haddrill continues to evaluate the business and we believe additional write-downs might be necessary," Falcone's report said.

The company also said it would not offer guidance on earnings in 2005, with Haddrill expressing concerns for the perception of the company if it failed to meet target projections.

The company today also made its first public reference to a lawsuit that names the company's Bally Gaming Inc. subsidiary, distributor of MindPlay, a computerized system that enables casino operators to monitor their blackjack tables.

In today's conference call, executives said they had not been served with the suit, filed Monday by gambler John Allen, a Los Angeles attorney, and that "newspaper reporters know more about it than we do."

The suit also names the state Gaming Control Board and the owners of the Eldorado Hotel & Casino in Reno as defendants. The suit alleges that the MindPlay system is an illegal device capable of giving casinos an unfair advantage over gamblers playing blackjack.

Alliance officials reported "fairly robust installations" of MindPlay and that the company intends to install it in casinos the company operates in Sparks and in Vicksburg, Miss.

The Eldorado, meanwhile, issued a statement Tuesday saying the property had not yet been served with the suit.

"The Eldorado can assure everyone that we would never do anything to alter the outcome of our games," the statement said. "What we've read so far in the media (about the lawsuit) is completely untrue."