Aristocrat Shifts Focus to North American Casinos

Aristocrat Leisure Ltd., the world’s second-largest maker of slot machines, is targeting U.S. and Canadian customers with new American-themed games to boost its share of the world’s biggest gaming market.

“Certainly the priorities, now more so than in the past, are centered on North America,” Executive Chairman David Simpson said in an interview in Las Vegas last week. “Even under these difficult economic conditions, it’s still the most important market. It’s our No. 1 focus.”

Aristocrat, whose chief executive officer quit in September, is seeking buyers for new games as a U.S. recession discourages casinos from spending money and Australian venues adjust to smoking bans. The Sydney-based company lowered its annual profit forecast as much as 40 percent last month.

Aristocrat is hoping video slot machines based on the movie “Jaws” and television series “The Sopranos,” and its second try at a new generation of traditional spinning-reel games, will prove to be American hits after “stumbles” in Australia and New Zealand, Simpson said.

“Originally, we came over with a big portfolio of games that were written essentially for New South Wales pubs and clubs,” Simpson said in the Nov. 19 interview at the company’s exhibit at the G2E casino equipment convention. “We’re now changing our product line. There’s much more of an American theme coming through.”

Mechanical Reels

Aristocrat, the largest maker of slot machines behind Reno, Nevada-based International Game Technology, also competes with U.S. companies Bally Technologies Inc. and WMS Industries Inc.

Aristocrat fell 28 cents, or 7.4 percent to A$3.52 at the close of trading in Sydney, extending this year’s decline to 69 percent. The company today announced a supplementary dividend of 2 cents and suspended its dividend reinvestment plan.

The company didn’t have a spinning-reel machine to compete in the U.S., where more than 40 percent of slot machines are the more traditional machines. Its first attempt at a new-generation five-reel slot machine was a failure, so the company has returned with a “fresh” second offering.

“We missed out badly there,” Simpson said. “It’s not critical, but it’s a big plus for us if we can get into it. It broadens our product offer into the casinos.”

Aristocrat has about 20 percent of the North American market for its category of video slots, Simpson said. It hasn’t yet competed in the video poker market.

“Not many Australian companies do that well here, and we’re doing relatively well,” he said. “Even this year, which has been a difficult year for us, we’re doing not too bad in North America.”

‘Biggest Stumble’

“Our biggest stumble has been Australia and New Zealand,” Simpson said. “Largely speaking, we really didn’t have the product, therefore, we didn’t make the sales, simple as that.”

Aristocrat has boosted spending on new game development and is being “more efficient” with its regulatory approvals, “gradually building up a portfolio of new games” to encourage its Australian customers to replace older poker machines.

The company remains focused on the biggest Australian markets, including the country’s most populous state, New South Wales, and on Crown Ltd., Australia’s largest casino owner, Simpson said.

Aristocrat isn’t pursuing some Australian markets as aggressively as in the past, citing complicated regulatory requirements in some smaller state jurisdictions, and higher gambling taxes and smoking bans that have hurt operators.

Paul Oneile quit as CEO on Sept. 29, three months ahead of schedule. Simpson, Aristocrat’s chairman, stepped into the executive chairman’s role while the company searches for a replacement. Aristocrat is considering some internal candidates among a list of prospects from around the world, Simpson said.

“There’s no leadership vacuum,” he said. “I’m confident with our team. There’s a level of talent underneath them, up and coming, and that gives me great confidence in the future.”

bloomberg

News Added: 24 November, 2008

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