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A smart client of mine (you're all smart) pinged me soon after I put out "IGT: A TALL PEAK OF EARNINGS".  He doubted that IGT could get back to 2007's peak EPS of $1.49, despite the cost cutting.  This is a legitimate question particularly since we are projecting only $0.94 in EPS for 2010. 

The quick answer involves cost cutting, lower share count, and "normal" replacements.  People may forget that the replacement cycle was well into a downturn following the wide implementation of ticket-in/ticket-out technology.  IGT only sold 21,000 replacement units that year versus our normalized estimate of 35,000.  IGT earns over $0.01 per share for every 1,000 units sold.  On the cost cutting front, IGT will have cut at least $75 million ($0.14 per share) out of its SG&A structure by the end of next year.  Of course, there are offsets such as higher interest expense, lower play levels in gaming operations, and lower expected international sales.

Here is the full analysis:

IGT: BRIDGING 2007 TO $2 - IGT bridge to  2

Taking it a step further, we've indicated that if the replacement market makes a V-shaped recovery, particularly in the Reel Spinning segment, IGT could earn $2 for a couple of years.  We get there the same was as above, except that replacement units could accelerate to 75,000 for IGT which would provide an additional 40,000 machines to our normalized estimate above, or an incremental $0.50 in EPS.  Presto, $2.00 in EPS.