A Jackpot for IGT?

When International Game Technology (IGT ) was trading in the mid-20s a year ago, several would-be suitors tried to entice the world's largest maker of computerized gambling systems into a buyout. But Chairman and CEO Chuck Mathewson was convinced that IGT, which makes such devices as slot machines and video poker games, was worth at least twice the going price. So he ducked the feelers.

The stock has rocketed to 60, giving IGT a market cap of $4.4 billion. With the stock up, Mathewson hasn't put up a For Sale sign, but he's more amenable to a takeover, say insiders. Has he had any nibbles? Mathewson, who turns 73 in June, said: "We've become too big for the people who were interested when the stock was in the 20s." But insiders say IBM and Microsoft have expressed interest. With its new Xbox video-game platform, Microsoft could develop markets via IGT's gaming systems. And IBM could enhance IGT's high-tech, high-cash-flow operations worldwide. As IGT diversifies into other entertainment fields, such as its new video games based on The Price Is Right and Austin Powers, IBM and Microsoft will get drawn to IGT, says an IGT exec. "Either would be acceptable to Chuck," he adds. Microsoft declined comment. IBM didn't return calls.

One new IGT product: a "cashless" gaming system. Instead of coins, the machines accept and pay out tickets with specific dollar amounts--so casinos don't have to load up on coins. Casinos, such as Harrah's and Bally's Las Vegas have replaced some machines with IGT's new system. "We are seeing a snowball effect of casinos converting to cashless machines," says Steven Kent of Goldman Sachs, who has a target of 70 for 2001. IGT's sales and gaming operations, he says, should beat expectations in the next few quarters. He sees IGT earning $2.70 a share in 2001 and $3.10 in 2002.

By Gene G. Marcial

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