International Game Technology, the world's largest maker of slot machines and casino systems, Thursday blamed the slowing economy and an "unprecedented" decline in casino play for lower third-quarter earnings.
Net income for the quarter ending June 30 dropped to $108.3 million, or 35 cents a share, compared with $136.4 million, or 42 cents, for the same period a year ago, the company said.
Revenue declined to $677.4 million from $706.5 million.
Analysts surveyed by Thomson Financial had anticipated 36 cents per share and revenue of $677 million.
In a conference call with analysts, the company lowered its guidance for the rest of the year and into early 2009 from 35 to 40 cents per share to 30 to 35 cents per share.
"The fact is these conditions we see in the marketplace are looking like they will continue for the foreseeable future. Unprecedented," said T.J. Matthews, IGT chairman and chief executive. "We've never really seen gaming-play levels fall."
IGT shares fell $2.45, or 9.9 percent, to $22.21 in morning trading.
Given the struggling economy, Matthews termed the quarter "pretty good."
Analysts agreed.
In a note to investors, Bill Lerner of Deutsche Bank said the earnings were "better than recent market expectations."
IGT's strong growth in past years was propelled by a robust replacement market, as casinos replaced outdated coin machines with ones using cashless, ticket technology.
For the quarter, product sales dropped to $343.8 million from $364.6 million as machine shipments fell to 20,200, down from 36,900 last year.
But the company anticipates an upswing in replacement demand as it nears widespread introduction of a new generation of server-based casino games and management systems.
Robin Farley with UBS said despite current disappointing earnings, the long-term outlook remains strong.
"The long-term story remains intact for IGT," she said in an investor's note. "The industry is moving closer to the introduction of server-based technology in 2009 and we believe this technology-driver replacement cycle will begin to affect 2009 and acceleration into 2010."
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