International Game Technology
Address:
520 South Rock Boulevard
P.O. Box 10580
Reno, Nevada 89510-0580
U.S.A.
Telephone: (702) 688-0100
Fax: (702) 688-0120
Statistics:
Public Company
Incorporated: 1980
Employees: 3,000
Sales: $478 million
Stock Exchanges: New York NASDAQ
SICs: 3999 Manufacturing Industries, Nec
Company History:
International Game Technology (IGT) is the world's leading designer and manufacturer of video slot machines, blackjack, keno and poker games, and proprietary software for computerized game monitoring. Its product line is the most extensive of any gaming equipment manufacturer and holds the top share of gaming machine sales in Nevada and New Jersey. IGT is also the only manufacturing company licensed to sell its machines in every regulated gambling jurisdiction in the world. The company has two major divisions: IGT-North America covers markets in Nevada and New Jersey, river boats, American Indian reservations, and sales to the Canadian government and Canadian First National. IGT-International, founded in 1993, covers markets in Latin America, Australia, Europe, Asia, and Africa.
The company was founded by William S.(Si) Redd in 1975 under the name A-1 Supply. Redd, the son of a Mississippi sharecropper, began his career in the gaming industry at age 18, when he bought a used pinball game and convinced a hamburger stand operator to keep the machine in his establishment in exchange for 50 percent of its revenues. After working as a distributor for Wurlitzer jukeboxes in New England, Redd was hired by Bally Manufacturing in 1967 to distribute slot machines in Nevada. He founded his own affiliate, Bally Distribution, and became known throughout the state as "The Slot Machine King." In 1975, Redd founded A-1 Supply and one year later entered into a deal with Bally Manufacturing through which he acquired sole rights to the company's burgeoning video business.
Redd devoted a large amount of resources to research and development. As a result, A-1 Supply became a pioneer in the video gaming industry, developing a line of video poker, blackjack, keno, and slot machines, which Redd sold to casino operators throughout Nevada and New Jersey. Redd changed the name of his company to SIRCOMA (from "SI Redd COin MAchines") in 1979. In 1980, SIRCOMA changed its name to International Game Technology and went public on NASDAQ in October 1981. Annual sales had grown from less than $3 million in 1975 to over $61 million in 1982. By 1982, approximately 9 percent of gambling machines in Nevada were video machines, and IGT held 90 percent of that market.
IGT also began developing its lottery game technology and by 1986 was one of the top six players in the $1 billion industry. That year it purchased a 36 percent stake in Syntech International, Inc., a rival manufacturer of lottery ticket vending machines and manager of several state lottery games. Revenues dropped precipitously in 1986, however, due to a slump in the Nevada gaming industry and growing competition from Japanese manufacturers. To help his struggling company, Redd hired Charles W. Mathewson to take over as chairman. Soon after, Mathewson was named president.
When Mathewson took over as president in 1986, he boasted that IGT stock prices (then trading at 11 cents a share) would double within two years. The company's heavy R&D spending paid off in 1987 when it introduced Megabucks, a computerized slot machine network that allowed any number of participants across the state to play for the same progressive jackpot. Within a year, IGT had sold Megabucks to over 30 casinos throughout Nevada and had obtained rights to sell the system in New Jersey. Mathewson's boasting had been proved correct. Fueled by strong sales of Megabucks, IGT's sales hit $81 million in 1987, and earnings rose to 71 cents a share. Share prices climbed, hitting 26.875 in September 1988, and rose further to 29 cents in 1990.
By 1988, IGT's Megabucks and other newly developed progressive jackpot systems had captured 60 percent of the Nevada slot machine market. IGT had also secured 25 percent of the international gaming market, with gaming machines in Australia, Portugal, the Netherlands, Turkey, and Monte Carlo. 1988 sales were $95 million, 25 to 30 percent of which came from international markets. The following year, revenues soared 50 percent to $151 million as earnings jumped to $1.73 a share.
In the early 1990s, the U.S. gaming industry began a growth spurt that sent IGT sales soaring. The Federal Government passed a law permitting native Americans to own and operate casinos on Indian reservations. Many other states, particularly those along the Mississippi River, began permitting riverboat gambling. IGT was well positioned to serve these emerging markets. Over half the river casinos built in the early 1990s were stocked solely with IGT machines. The nation's largest Indian reservation casino purchased 80 percent of its machines from IGT, and the new Luxor, Treasure Island, and MGM Grand casinos in Las Vegas purchased a minimum of 70 percent of their machines from IGT.
European gaming markets also expanded, and, in 1991, IGT opened a European division, with plans to establish an assembly factory, a product distribution center, and a direct factory sales center in Europe. After a long and arduous attempt to break into the Japanese gambling market, IGT received approval to sell slot and paschisuro machines there in April of 1993.
In 1993, IGT reorganized its corporate structure, establishing IGT-International to oversee manufacturing and sales outside of North America, and creating the corporate "Office of the President" to direct strategic planning worldwide. 1993 sales were $478 million, with earnings over $100 million. Stock prices continued to climb, trading at $38.75, three times its expected earnings.
As IGT entered the mid-1990s, analysts predicted that it would remain the leader in the gaming machine industry throughout the decade. IGT had been able to stay on top of the booming gaming market by regularly introducing new games and quickly adapting to changes in the market. As the Wall Street Journal stated, IGT machines "tend to get played much more heavily than machines by competitors." As the number of casinos worldwide swelled, IGT's profits followed.
Further Reading:
Clements, Jonathan, "IGT Stock Is Riding High on Gambling Boom, and the Bells Could Keep Ringing for a While," The Wall Street Journal, September 20, 1993, p. C2.
Lane, Randall, "Back into the Breach," Forbes, November 9, 1992, p. 96.
Paris, Ellen, "Call and Raise," Forbes, August 30, 1982, p. 50.
Schlesinger, Jacob M., "Tough Gamble: A Slot-Machine Maker Trying to Sell in Japan Hits Countless Barriers," The Wall Street Journal, May 11, 1993, p. A1.
Source: International Directory of Company Histories, Vol. 10. St. James Press, 1995.
