2006 was supposed to be a transitional year for leading slot machine manufacturers like International Game Technology (NYSE:IGT) and rival WMS Gaming (NYSE:WMS). The massive rollout of cashless, ticket-based machines in prior years had pulled some demand forward, and product orders were expected to remain sluggish ahead of the next upgrade cycle and the introduction of new gaming jurisdictions in Pennsylvania.

If this was a "lull" for IGT, then shareholders can't wait to see what happens when business finally picks up.

A look back
Back in January, analysts were expecting a sharp 18% dip in the firm's first-quarter earnings. However, IGT managed to increase quarterly profits by a penny per share, easily topping expectations -- a precursor of things to come. Meanwhile, the number of installed slot machines in the company's gaming division raced past 40,000, while gross margins in the segment expanded significantly, two more trends that would remain in place throughout the year.

Three months later, IGT followed up with an even more impressive performance, unveiling solid second-quarter results and raising its outlook for the remainder of the fiscal year. Revenues for the period rose 17% to a record $644.4 million, driven by a 93% spike in international sales. Meanwhile, with margins continuing to improve, earnings jumped 35% to $0.35 per share, again shooting past analysts' expectations. The shares rallied nearly 10% on the news, climbing to a new 52-week high of $38.14.

And then in July, IGT again posted EPS that topped estimates, thanks in part to having 22 million fewer diluted shares outstanding because of recent buybacks. Though unit volume was essentially flat, demand for premium products helped push average revenues per machine from $11,400 to $12,600. More importantly, the firm's base of installed slot machines rose 7,700 year over year to reach 46,200. And with those machines spitting out average revenues of $76 per day, third-quarter gaming revenues swelled to a record high of $315 million.

Finally, in November, IGT announced that fourth-quarter earnings rose 10% to $0.33 per share, once again slipping past Wall Street targets and extending the firm's streak of positive earnings surprises. At this point, the number of installed slots approached the 50,000 threshold, which -- coupled with a healthy 16% increase in the sale of parts, gaming systems and other "non-machine" products -- helped lift revenues for the year to a record $2.5 billion.

The short, short version
Despite not having any catalysts in place to dramatically boost product sales, IGT still managed to ship more than 100,000 units worldwide in 2006 -- a total that should rise significantly in the coming years when server-based and multiplayer technology fuels the next wave of replacement orders, and new gaming jurisdictions begin to feed demand.

Meanwhile, the firm's installed base of slot machines continues to grow at a healthy clip, and each of those units churns out a steady stream of recurring revenues day and night that broke the $1.2 billion mark for the year.

With the company more than holding its ground during this challenging year, a number of shareholders have climbed on board ahead of what could be a banner 2007. In fact, the shares have raced ahead more than 50% over the past 12 months.

What the crowd thinks
Of course, yesterday's growth doesn't do tomorrow's investors any good. So, what is in store for IGT going forward? Judging by the bullish opinion of our CAPS community, shareholders can expect more of the same.


CAPS Rating **** (out of five stars)

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As you can see, more than nine out of every 10 players are banking on IGT to outperform the S&P 500. Here's the big-picture look shared by one of them, Anysimplefool:

"Gambling continues to become more and more mainstream. Asian market just beginning to develop. Slots seem to weather any economic downturn with ease. Increased number of retiring boomers who are willing and anxious to spend hours in casino gaming. Long-term winner."

With few exceptions, shareholders should be pleased with IGT's accomplishments over the past year, and have even more reasons to be optimistic about 2007. Until then, this latest dividend increase makes for a nice stocking stuffer.

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Check out the other companies featured in "The Motley Fool's 2006 in Review and 2007 Preview" special.

Fool contributor Nathan Slaughter thinks dividend increases make a great gift any time of year. So does Motley Fool Income Investor, which is dedicated to seeking out the best dividend payers for your money. You can check it out with a30-day free trial. Nathan owns shares of IGT. The Fool has a tamper-proofdisclosure policy.