Shuffle Master (SHFL ) has a hot hand. The Las Vegas-based company created the casino industry's first reliable card-shuffling machine in 1983. Thanks to the growth in casino gambling, surging interest in poker, and a host of new products, Shuffle Master's sales have grown 19.8% annually for the past three years, to $68 million. Profits have climbed at a 25.2% rate, to $18 million, earning it the N. 19 spot on BusinessWeek's annual Hot Growth list.
BusinessWeek Los Angeles Correspondent Chris Palmeri spoke with Chairman and Chief Executive Mark L. Yoseloff about Shuffle Master's winning strategy. Following are edited excerpts from their conversation:
Q: Did this company really invent electric card shufflers?
A:Nobody had created one that worked. None had the capabilities that ours do, the reliability, the security. We continue to add features, such as data collection. We're constantly enhancing the products, making them faster, quieter, and better looking.
Our latest model looks at the face of each card, to make sure there's a complete deck. Normally when a dealer finishes a shift they throw away the deck. Our machine allows the casinos to reuse them. That's a saving of $150 a month for the casinos. It pays for the shuffler.
Q: You generate that kind of growth with something as simple as card shufflers?
A:We've become quite diversified. We make shufflers, but we also sell proprietary games on a royalty basis. The company invented Let It Ride, a game that you need the shuffler for. It's a version of five-card stud. Casinos pay a monthly or lifetime royalty. This can be anything from a few hundred dollars to $2,000 a month. This is now a $25 million-a-year business, and the margins are extremely high.
Q: You're also benefiting from the fact that poker is popular?
A:We put out the first shuffler for poker rooms. It's called the Deck Mate, and it's embedded in the table. The game runs faster. Poker rooms get a rake [a share of the pot], so the casinos like it. We have the right product at the right time.
Q: What's your background?
A:I have a PhD in math from Princeton. I was a college professor. I was involved in the early development of microprocessor-based thinking machines in the '70s. Then I worked in entertainment products, handheld games. I was a senior executive at Coleco. Then I went to a private company that wrote software for slot machines.
Q: Can you keep this kind of growth up?
A:The young and beautiful people are gravitating toward table games. We figure that there are 40,000 tables in the world -- we're on 12,000. You know they discovered the ruins of a casino in Pompei, and among the artifacts were loaded dice. That tells you how much of the human soul is in gambling -- and the importance of security.