Slot machine-maker WMS's shares plunge as competition heats up

Tue Aug 7, 2012 12:51pm EDT

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(Reuters) - Shares of slot machine-maker WMS Industries Inc (WMS.N) lost about a fifth of their value after the company posted fourth-quarter profit below analysts' estimates as rising competition hit its gaming operations segment.

On a post-earnings conference call, WMS Industries signaled it would accelerate spending in an effort to spark growth and stave off increasing competition.

"We are concerned about the aggressive spending on interactive initiatives given the recent slowdown in the sector and uncertain outlook for the legalization of internet gaming in the United States," Roth Capital Markets analyst Todd Eilers said.

Last month, larger rival International Game Technology's (IGT.N) stock slipped 16 percent after quarterly results fell short of Wall Street estimates hurt by increased competition.

The growing competition in the sector prompted Stifel Nicolaus analyst Steven Wieczynski to lower his expectations for installed base growth in WMS's game operations business.

"Although the commentary around the current competitive environment should not come as a surprise to investors, we do believe its reinforcement could weaken the Street's conviction in the WMS turnaround story," Wieczynski said.

Shares of Scientific Games Corp (SGMS.O), which makes tickets and software for lotteries, fell as much 34 percent after it posted a quarterly loss on the back of sluggish sales in Italy and China.

Stifel's Wieczynski said he expects China sales to slowly start improving as content gets stronger, but the Italian market remains a question mark.

Shares of WMS were down 16 percent at $15.24 on Tuesday afternoon on the New York Stock Exchange. They had fallen as much as 31 percent, earlier in the session, to their lowest levels in almost seven years.

Scientific Games' shares, which touched a nine-year low earlier today, were down 15 percent at $7.08.

(Reporting by Ranjita Ganesan and Chris Jonathan Peters in Bangalore; Editing by Supriya Kurane)

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