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Harrah's to Buy International Game's Coinless Slot Machines

The order for 11,000 units raises shares of the slot maker 11%. Harrah's joins Park Place and MGM in updating.

October 14, 2003|From Bloomberg News and Reuters

Slot machine maker International Game Technology Inc. said Monday that Harrah's Entertainment Inc. had agreed to purchase at least 11,000 slot machines that let gamblers wager with tickets instead of coins.

The announcement buoyed shares of International Game, which surged 11%.

The order may be the biggest ever for International Game, the Reno, Nev.-based company said. Financial terms weren't disclosed.

Harrah's will install in the machines its Fast Cash system, a cashless technology that helps the casino company track gamblers' play.

The order was taken as an affirmation for International Game, which has about two-thirds of the U.S. slot machine market, and for cashless technology, which uses bar-coded paper tickets to replace coins -- both for playing the slots and awarding winnings.

International Game's sales have been boosted by coinless slots, which reduce labor costs for casinos and let gamblers collect jackpots more quickly. Harrah's joins Park Place Entertainment Corp. and MGM Mirage in ordering the new machines.

"Harrah's is one of the last holdouts with respect to large orders for replacement machines" from International Game, said Merrill Lynch & Co. analyst David Anders. "Any remaining casinos really need to upgrade their floors." Anders raised his rating on International Game to "buy" from "neutral" and doesn't own the shares.

Shares of International Game rose $3.07 to $31.16, a 52-week high, on the New York Stock Exchange. They have risen 64% this year.

International Game shares also have gained on growth driven by the spread of gambling to new states and within existing locales, such as the Indian casinos in California.

A new slot machine costs $9,000 to $10,000, Anders said. The Harrah's order includes discounts both for its size and for trade-ins of older machines, said Ed Rogich, vice president of marketing for International Game.

International Game said it would sell 60,000 to 65,000 replacement slot machines to U.S. casinos in fiscal 2004, which began Oct. 1.

The company wouldn't say how many it sold in the year just ended.

The order will represent about three-quarters of Harrah's slot machine purchases next year, the companies said.

Harrah's had 42,585 slot machines in its 26 casinos at the end of 2002, the company said in a Securities and Exchange Commission filing.

The company said that fewer than 10% of its slot machines accept the printed tickets.

But it is installing the new order as fast as possible, and aims to have half of the new order installed by the end of 2003, a Harrah's spokesman said.

Las Vegas-based Harrah's is the second-largest U.S. casino company, behind Park Place Entertainment. Harrah's shares rose 21 cents to $42.05 on the NYSE. They've risen 6.2% this year.

MGM Mirage, the third-largest casino company, ordered 7,000 of the slots from International Game last year, and Park Place said in 2001 that it would install 15,000 of the slot machines.

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