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Here are our company notes from our Las Vegas trip last week

Replacements?

  • The 5 cent window in their guidance is related to the uncertainty around replacement demand
  • Sentiment has improved meaningfully - but they haven't seen any real pick up in orders. Taking a “wait and see” approach
  • In 2009, most of the casino capex budgets were very conservative and many weren’t really followed as things continued to get worse throughout 4Q08
  • 2010 should be better because you have a budget you will follow. They didn’t really want to quantify any expected increase

Hot Products:

  • Multi Layer Display (MLD) – selling for $19k.  Approximately 900 were shipped last quarter. One of their hottest products.

Discounting:

  • Claim that they aren’t really doing it - and that you can see that in the numbers and the margins that they report. 
  • We are hearing that a lot of discounting and deal-making is occurring.

Consolidating platforms & Cost Cuts:

  • Some of the different platforms are due to different geographies – for instance, Australia has their own platform, a lot through acquisitions (wager works/PGIC/Barcrest). Transitioning people to the same platform is a challenge and something that Chris Sachels (Microsoft former exec) is focused on integrating
  • Reducing material and design costs.
  • Game ops: trying to be more efficient on developed, more stream-lined boxes. SBG concept – they showed us the new MLD boxes that have about 100 different titles on the box (reels/ poker/ video) etc…
  • R&D is at the right level - but need better control about how those games get allocated. Better spend management.

R&D

  • Shift in focus towards content away from systems (SBG). 12-18 months title to go soup to nuts. But can compress that by going into vertical development.
  • Outsourcing content? They have a group of people that regularly develop content for them externally. 
  • We’ve heard from reliable sources that IGT plans on outsourcing much more content

M&A:

  • They are not interested in large scale M&A, but would be stupid not to be thinking about online. Unclear how they will approach it: white label/content/operator?
  • Patti has been telling people that they plan to look outside of gaming. This scares us at Research Edge.

Other:

  • SBG purchase? Imperial Palace in Biloxi has signed ($6-10 per day per device) on 60 units.
  • Patty’s Comp: 2010 is tied to EPS growth. But will be TBD going forward – wants a more “soft” formula
  • Pre-G2E show with BYI this year - Sunday Nov 15th.
  • Reel/video: no changes in the mix.

Argentina:

  • Casino Club Rosario will open over Sept/Oct 2009 and IGT got 70% of the floor share
  • IGT provided Casino Clubs Argentina with a $100MM line of credit for development and $40MM line towards floor financing; $93MM was funded as of June 30th
  • Company told me that casinos will have 3,500 units (website says 2,000 so getting a clarification on that)
  • Since IGT also provided the system, they will account for it either in this coming quarter or the following quarter