What are you most proud of as far as your tenure with WMS to date?
Edidin: It’s been great to be a part of a company that has grown so much over the past decade to become a leading global gaming supplier and a thought leader in our industry. We’ve assembled an incredibly talented and passionate team. Additionally, I’m very proud of our company’s financial performance over the past seven years-during which our revenue has more than tripled. WMS is currently offering some of the most appealing, innovative and highest earning products in the industry and we have gained market share, despite a currently weak economy and replacement cycle.
Intellectual property has been a primary focus for WMS and for most companies. How important has that IP portfolio been in getting WMS to where it is today?
Developing intellectual property has been and remains an important focus for WMS – this is one of the primary reasons for the success of our games. Our IP portfolio and the company’s strong culture of innovation form the foundation supporting our revenue growth. Our intellectual property portfolio has grown tremendously since 2000 and now includes more than 1,000 pending and issued patents. In particular, our focused investments in R&D and the continued development of our talented workforce are the key differentiators that are driving our success.
Our ongoing investments in technological and business process innovation continues to generate an expanding pipeline of high-earning, must-have products that are resulting in WMS garnering global market share gains, both in our for-sale and participation businesses. Our innovative solutions give our casino customers tangible reasons why they should place our products on their casino floor.
WMS has never had a “systems” component in the traditional sense, yet technological innovation has been a hallmark for the company. Describe what makes WMS stand out from its competitors. How has not having that component either hampered or freed the company to pursue new initiatives?
A significant advantage for WMS as we enter the systems and systems applications arena is that our development efforts and thinking are not hindered by constraints of older, proprietary legacy systems. We were able to start with a clean vision and a clean slate, aimed at creating and delivering the high-return benefits that our customers desire, while utilizing the increased power, capabilities and open interoperability of a server-supported, high-speed network to create exciting new gaming experiences for players.
Similar to how we designed our wide-area progressive systems to support required functionality and enable unique game mechanics, we have the advantage of creating a networked gaming system from the ground up that is extensible to support both enterprise applications and game enablement.
Players today are increasingly sophisticated in their use of technology and their choices of how they spend their entertainment dollars. And, our casino customers demand products that produce high returns and that will attract a broader player audience to their slot floor – which, even in a slow economy, remains the core of profitability and provides the highest return on investment for most casino operators.
How is WMS being positioned going forward into the networked gaming world?
As we look forward to the launch of networked gaming, we are on the verge of substantial industry change and growth that creates significant opportunities for WMS. We believe that WMS is well-positioned to benefit from the long-term opportunities that lie ahead with the adoption of networked gaming.
As already demonstrated in the products introduced over the past two years, we have a clear strategy for the transition path to networked gaming that generates profitable growth and success product bank-by-product bank, quarter-by-quarter. With a clearly defined vision of the benefits made possible in a server-supported, networked gaming environment, we are already achieving notable market growth. We expect to continue to achieve further growth in advance of receiving regulatory approvals of our first commercialized server-based systems, by producing a consistent flow of unique and exciting products using the foundational technologies required for success in the networked gaming world.
WMS is pursuing a unique path to the networked, server-enabled marketplace that takes elements of our technology road map and converts them into fully commercialized, revenue-producing products in advance of the launch of the full functionality of server-based gaming. And, without being tied down to legacy system platforms that need updating and development support, we have dedicated 100 percent of our server-based R&D expenditures to our WAGE-NET system and new applications for an open architecture, networked gaming environment where all the games and systems can easily communicate in real-time, on a fully open basis, compliant with standards promulgated by the Gaming Standards Association.
Recently, Harrah’s Entertainment and other gaming companies have pulled out some participation games from their floors. Is it just the economic downturn driving this trend, or are we seeing a move away from the participation model. What would that mean for gaming manufacturers’ pricing models?
We are not seeing customers move away from the participation model. Speaking for WMS, we have experienced an increase in our installed participation base as well as win-per-day metrics. During the last 12 months, our average installed base of participation games continued to expand; and in the most recent June 2008 quarter, our average installed based increased 18 percent over the prior-year quarter. We feel this is due in large part to WMS’ focus on leveraging technology to provide a dynamic player experience. By creating differentiated, premium product enabled by the latest technological advances, we are offering products which are in high demand by players and creating terrific returns for our customers. Moreover, certain customers prefer the flexibility afforded by the participation model during times of capital spending constraints
In the server-based world, how do you envision pricing for games? Would they be subscription based, with higher priced tiers for more popular titles or do we even know at this point?
A common misconception is to view the networked gaming future as encompassing only a single product. With open standards, there will be multiple products and multiple pricing models. We will be flexible in our approach to pricing and be responsive to our customers’ needs. SBG will continue to include hardware and gaming content, but also multiple categories of systems applications, in addition to a network management system and the legacy slot accounting systems.
How important is global expansion to your future and what steps are you taking in that regard?
WMS products are present in more than 70 countries and we have built strong and well-respected international relationships and place strong value on our international customer’s needs. In fiscal 2008, global unit shipments grew 9 percent to 27,931 gaming machines and the average installed base of participation gaming machines rose 20 percent. Today, our international unit sales represent more than 35 percent of our total new unit shipments, and WMS is respected as one of the foremost slot machine companies in the world. Our goal is to continue to pursue new business opportunities to leverage WMS’ capabilities for innovative product development that meet the demand for state-of-the-art gaming technology to capture significant growth opportunities throughout Europe, Asia and Latin America.
What are other short and long-range goals for the company?
WMS is focused on a set of five measurable, strategic priorities: one, maintaining the growth in our gaming operations, while more efficiently investing our capital deployed in that business; two, growing our North American market share through innovative new product offerings; three, expanding our international business; four, improving margins; and, five, raising operating cash flow and overall capital returns. By concentrating on innovation and creating intellectual property, by emphasizing continuous improvement in the execution of our five priorities and by focusing on being a company that retains, develops and attracts innovative, passionate and dedicated people, we expect to further strengthen our competitive advantages and positioning for future growth. Our market share growth results from targeted product development strategies aimed at creating innovative and differentiated games that players love to play. Developing innovative products enabled by new technologies and intellectual property, and benchmarking how they’ll meet players’ expectations, is the backbone of our Player Driven Innovation process.
Any other thoughts?
It is worth reiterating WMS’ commitment to investing in our people. From the incredible effort that goes into securing the intellectual property critical in the creation of a game or system to the building and construction of our products on the manufacturing floor, all of the credit goes to our talented group of employees. Every game is carefully built with the player in mind, with the goal being to enhance the player’s experience not once, but every time they sit down to play a WMS game. I’m very proud of what our team is accomplishing.