International Games Technology ( IGT - Analyst Report ) inked a letter of intent (LOI) with Revel Entertainment Group, LLC to provide its casino systems solution to the latter. IGT will install IGT Advantage and sbX casino management systems and Service Window applications, which will enhance the casino experience for the customers making a splurge in Revel casinos.

According to the LOI signed between the two parties, IGT will be providing gaming machines for almost 40% of the casino floor including IGT’s popular MegaJackpots. Additionally, IGT will be providing the casino management system that includes IGT Floor Manager, Media Manager and Service Window, with applications including Intelligent Bonusing and Taxable Accrual, as well as IGT Mariposa business intelligence solutions.

These products are expected to improve the efficiency of the casino floor, helping to attract and retain customers and at the same time, lowering operating costs. Thus, eventually, it will enable the company to improve on the bottom-line.

The gaming solution sbX has multiple tools, which spices up the entire gaming experience. sbX Service Window provides unique player-interaction experience at the slot machine. The window provides options regarding information and services that the players and operators can optimize. sbX Floor Manager allows access to the IGT game library, enabling operators to efficiently mange their casino floor with the mere touch of a button.

IGT’s sbX is the first server-based gaming solution that allows its operators to run games of their own choice at any time they wish and facilitates better casino floor management.

Recommendation

The casino sector continues to face macro-economic concerns due to high unemployment levels. This has led many casino operators to reduce their costs in an attempt to preserve their liquidity, subsequently resulting in a slower machine replacement cycle. This trend appears to be hurting IGT’s growth outlook.

While sluggish replacement sales will remain a primary headwind for IGT in the near term, we expect sbX to continue to enjoy high demand in both the domestic and overseas market due to its cost effectiveness.

We believe that international expansion, an impressive product portfolio, cost-cutting initiatives, reducing dependence on the domestic machine replacement cycle, new contract wins, solid free cash flow and strong growth from the interactive business will drive growth over the long term.

However, sluggish macro-economic conditions, fewer new openings and increasing competition from Bally Technologies Inc. ( BYI - Snapshot Report ) and WMS Industries Inc. ( WMS - Snapshot Report ) will keep the stock range bound in the near term.

We have a Neutral recommendation on the stock over the long term (6-12 months). Currently, IGT has been allotted a Zacks #3 Rank, which implies a Hold rating on a short-term basis.