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Upstart Firm Takes $121-Million Lottery Prize From Big Guys : State Lotto Contract Secures Place for GTECH at Apex of Gaming Industry

March 16, 1986|ERIC MALNIC | Times Staff Writer

PROVIDENCE, R.I. — There's Robert Stern, the "financial genius." There's Guy Snowden, the "driving force." There's Victor Markowicz, the "mad scientist."

If they sound like the sort of upstart trio that could take on the giants of the gaming industry and emerge victorious and rich, they are.

A few years ago, they assembled a little firm they called GTECH, which they set up in Rhode Island.

And together, with support from people like the rich Bass brothers of Texas and the endorsement of a tough Irish cop who once walked unarmed into a prison riot and talked knife-wielding inmates into surrendering, they bid on the largest lottery contract in the world--California's--and won it.

"This company has emerged, really from no place, to dominate the industry," said Edward F. McSweeney, a New York investment analyst.

Few in Industry Surprised

The fact that a financial midget like GTECH could knock off big guys like Control Data, General Instrument and Bally Manufacturing didn't seem to surprise anybody in the lottery business.

"GTECH's good. Very good," said Duane Burke, chairman of the Public Gaming Institute in Rockville, Md., a private research organization that pools and publishes information on the legal gambling industry. "They're aggressive. They're sharp. They're untainted. They didn't fall into it; they worked hard. . . .

"The others are diversified, into all sorts of things. GTECH has remained focused on gaming."

"More than anything else, the large companies lost sight of the customer, started moving money to the bottom line instead of advancing technology," said Ralph Batch, a former FBI agent and mayor of Short Hills, N.J., who headed the New Jersey, Illinois and Delaware lotteries before retiring last year. "GTECH didn't make that mistake."

New York Contract Landed

GTECH got the $121-million, four-year contract to set up a computerized "numbers game" on Feb. 14, just one day after the firm had won half the $105-million contract for the computerized lottery system in New York.

That means GTECH has won seven of the last nine state Lotto contracts--with about 70% of the lottery terminals in the United States--and has established itself as the overwhelming favorite in upcoming competition for new contracts.

Those are giant leaps for a company that had gross sales of just $8 million in 1981.

"Not bad for a bunch of amateurs," quipped Stern, the board chairman of GTECH.

Amateurs they're not.

Stern, 62, a native of Brooklyn who served as a Marine during World War II before training as an electrical engineer at the RCA Institute, started fussing with computers back in the 1950s, after he bumped into John Mauchly at the University of Pennsylvania.

It was Mauchly, along with fellow engineer John Eckert, who had developed the world's first electronic computer--the Eniac--in 1945 in response to the Army's request for a faster method of calculating the trajectory of artillery shells. In 1951, Mauchly and Eckert produced the first in a famous series of computers--the Univacs--that used magnetic tape for input and output data. Later, Mauchly started his own computer software firm.

"A friend called and said Mauchly was in trouble financially," Stern recalled. "I joined him in Mauchly & Associates. We did software and systems work, and we worked hard. He only slept two to three hours a night. It was a struggle, but it was fun."

By 1968, though, the firm was broke.

He said it was one of the few disappointments in a series of electronics companies that he founded or salvaged during the '50s, '60s and '70s. One built hybrid computers, another processed seismic data for the petroleum industry, a third developed the control systems for the Hawk missile. A fourth was Datatrol, a firm that provided computer-linked cash register terminals for department stores.

'Our Guiding Light'

"Stern's a financial genius," Snowden said. "He's been our guiding light financially."

Snowden, 40, was born and reared in Upstate New York. After studying at Syracuse University, he moved on to IBM in Yorktown, N.Y., "where I learned a lot about on-line computer systems."

In the early '70s, Snowden hooked up with Systems Operations Inc., a firm Markowicz had help set up as a consulting service for the gaming industry.

People who knew Snowden then said he immediately began leaving his mark on the industry.

"He's a driving force," Batch said. "And a capable administrator."

"Snowden has extremely good rapport with people, with customers," Markowicz said. "But his greatest asset is his vision."

If Snowden had the vision, Markowicz had the technical expertise and imagination.

Born in Russia in 1944, Markowicz is the son of Jewish refugees who fled east from Poland to avoid the advancing Nazis. Deported back to Poland after the war, the family emigrated to Israel in 1964, where Markowicz completed his studies in mathematics and worked on the development of that nation's first commercial computer.

He came to the United States in 1970, he said, "to have a look around. . . ."

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