- A little context may allay concerns somewhat. It wasn't that long ago that IGT's ship share fell from 75% to below 60% earlier this decade. The company then took the lead in Ticket-in, Ticket-out (TITO) and dominated the technology and the roll-out. Market share climbed all the way to 80% at the height of the cycle in 2003-2004. A similar situation occurred with the bill acceptor in the mid 1990s. History shows us that market share could improve again with the advent of the next technological cycle, Server Based Gaming presumably. That will help. IGT also overcame a huge spurt in video gaming machines when it was primarily a stepper company. A concerted R&D effort led to the market share lead in the video space after the belated start. Finally, IGT blazed a huge video poker path in the 1980s to overtake Bally as the #1, a spot it has yet to relinquish.
- How does IGT ensure that it doesn't relinquish that spot? More R&D may not be the answer. The company is boastful of its significant R&D budget relative to the industry (see the 2nd chart). More importantly, IGT has spent wisely and efficiently, until recently. Prior to 2006, IGT's ship share and share of casino participation games exceeded its portion of industry R&D spend. Could it be that 70-80% market share is not normal for a semi-mature industry? It is reasonable to believe that the pathetic shape of the competition contributed to an artificially high market share. With a revamped WMS, Bally, and Aristocrat maybe 40-50% share should be the target. Acceptance is the first step on the path to recovery. The 2nd step may be to refocus spending. Rationalizing R&D is probably a good place to start. Industry consolidation may be another.
McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’
If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.read more
Europe's Battles Against Apple, Google, Innovation & Jobs
"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”read more