Inside Wall Street
WHY COINS ARE DROPPING INTO IGT
Top guns at International Game Technology (IGT) and most Street analysts are pooh-poohing rumors that the No.1 U.S. slot-machine maker is a takeover target. "The big news is that nothing is happening," insists IGT Chairman Chuck Mathewson, who owns nearly 5% of the stock. Yet since May 4, when the shares hit a low of 125/8, they have rebounded to 15 on very heavy volume--between 1 million and 3 million shares some days. So what's up?
A couple of hedge-fund investors have been snapping up the stock, say some momentum investors--pros who jump on sharp turns in trading patterns. The buyers are betting, says one investor, that either Sony or Sega Enterprises will make a run for IGT. In a buyout, IGT stock is well worth 30, he says. "The stock appears to be headed higher, due to improving investor psychology emanating from the takeover speculation," notes David Boczar of Value Investing Partners in Westport, Conn.
Gaming analyst Steve Eisenberg of Oppenheimer says IGT's improved cost structure, signs of a pickup in profit margins, and low debt make it a sitting duck for a deep-pocketed group. The likes of Sony or Sega, he figures, could logically link their entertainment capabilities with IGT's skill and scope in slot machines.
Until lately, the stock had been falling because of disappointing earnings. It was trading at 33 last year. Spokespersons for Sony and Sega didn't return calls.BY GENE G. MARCIAL