Long-suffering investors in the gambling business don't need many encouraging words to elevate their mood. So when International Game Technology (NYSE:IGT) said it detected "modest upticks in spending" by many of its customers, the stock took off.

Patti Hart, CEO of the gambling technology company, spoke Thursday after markets had closed. She said the gambling environment had "stabilized" during the last six months of the fiscal year ended Sept. 30. By the close of trading last Friday, IGT's stock was up nearly 9%.

The stock rallied even though IGT reported a fourth-quarter GAAP loss of $0.07 a share, versus a profit of $0.18 for the year-ago period. Total revenue dropped to $514.6 million, from $632.2 million.

Why all the cheering, especially for a company whose total debt-to-shareholders' equity ratio is more than 2 to 1? Look no further than IGT's $0.20 in fourth-quarter earnings per share, excluding one-time items, which beat the Wall Street consensus of $0.17.

Tough competitors
Although it's the United States' largest publicly traded gambling technology company, IGT hasn't been able to keep up with peers WMS Industries (NYSE:WMS) and Bally Technologies (NYSE:BYI). Over the short term (12 months) and the long term (five years), their stocks outperform IGT's shares.

WMS recently reported earnings per share of $0.36, excluding one-time items, for its first quarter, matching Wall Street's expectations. For Bally's latest quarter, it reported $0.53 per share, which also matched the average analyst estimate. Quarterly revenue rose for WMS, but fell for Bally.

Place your bets
Although the gambling technology industry is strongly tied to commercial casino operators such as Las Vegas Sands (NYSE:LVS), Wynn Resorts (NASDAQ:WYNN), and MGM Mirage (NYSE:MGM), these "bet tech" companies can still moderate their downside risk. They serve other gambling outlets such as lotteries, off-track-betting, Indian casinos, and racinos -- slot-machine facilities built next to racetracks.

The recent approval of table games in four Ohio cities; Maryland's recent approval of a slot-machine contract; the prospects of racinos in Ohio; the upcoming choice of a racino contract in New York City; and the debate in Pennsylvania for permitting table games all offer encouragement to the industry.

Bally recently raised its fiscal 2010 earnings guidance, while WMS maintained its fiscal 2010 revenue guidance. The range for IGT's earnings guidance straddles Wall Street's consensus.

Investors have recently heard murmurs of optimism from casino operators like Las Vegas Sands and MGM Mirage. If this brighter outlook is borne out by reality, shareholders of IGT and the other betting-technology companies will be in the money. If not, they could be more of a gamble than an investment.