Galaxy Gaming enhancing the table

16 March 2009

LAS VEGAS, Nevada -- Galaxy Gaming is not your typical startup casino vendor.

The Las Vegas-based table game provider has been around for 12 years, starting out inside a small casino in Washington in 1997. The company's initial product was a side wager for blackjack where players bet on getting a two-card 20. The wager is now called Lucky Ladies and players are paid varying odds based on the nature of the 20.

Galaxy Gaming President Robert Saucier lived off that table game enhancement for five years.

"We were a one-trick pony until 2002," Saucier said. "Then we came out with our second product."

Galaxy Gaming now offers casinos five side wagers for blackjack and pai gow poker and two proprietary, nontraditional table games. The company's products are on 1,500 gaming tables, making Galaxy Gaming the No. 2 table game provider behind Shuffle Master.

The company hopes to complete a public offering sometime in April in which it would raise $800,000. Galaxy plans to list 2 million shares on the Over-the-Counter Bulletin Board. The proceeds from the offering will help expand the company's distribution network into additional casino markets throughout North America.

"The major goal we have is to be a good, solid No. 2 competitor (to Shuffle Master)," Saucier said. "Our goals are to introduce some new products in 2009, expand our geographic reach in North America and increase our sales force."

Gaming analysts believe the time is right for casinos to try different wagering products. The down economy has reduced consumer spending and gaming revenues have fallen in most major gambling jurisdictions.

In Nevada last year, gamblers wagered $29.8 billion on table games, a decline of 5.8 percent from 2007. On the Strip, table game wagering was off 5.2 percent.

New table games may be one way to interest gamblers.

"Casinos are always looking for products that generate better returns," said Deutsche Bank gaming analyst Bill Lerner. "Casinos like different specialty table game products, like a side wager, because it will increase the revenues generated by each table. If the math model works and there's a consumer demand for it, it's going to translate into a favorable return for the casinos."

Galaxy Gaming's primary business are side wagers, such as Emperor's Challenge, a bonus bet on pai gow, and Suited Royals, a blackjack wager which allows players to bet on receiving two face cards from the same suit.

The company also has two unique table games, a variation of Texas Hold'em poker called Texas Shootout and a poker game called Three Card Split.

Galaxy's products are fighting for casino space with games offered by Shuffle Master, including Let it Ride, Three Card Poker and Caribbean Stud. According to Shuffle Master's first quarter earnings, the company had almost 5,600 proprietary table games in casinos worldwide.

Stifel Nicolaus gaming analyst Steven Wieczynski said there is room for competition to Shuffle Master. Table game development is challenging, but casinos are willing to devote floor space to new games.

"If the games make money and customers are willing to play the games, then the casinos are going to buy them," Wieczynski said. "The key is creating the demand for the games."

Saucier said he's encouraged by feedback from casino operators. Shuffle Master acquired Caribbean Stud and several other table games from Progressive Gaming in 2007. Three Card Poker was developed by table game designer Derek Webb and was bought by Shuffle Master several years ago.

He believes the casino industry wants competition in the table game market similar to the slot machine side of the business.

"Nobody wants to deal with just one company and not have an alternative," Saucier said. "I think casinos are rooting for us because they want that alternative."

The Shuffle Master business model should be familiar to the Galaxy Gaming's top executives. Bill O'Hara, Galaxy's chief operating officer, is one of the original key employees of Shuffle Master, which was founded in Minnesota by former truck driver John Breeding. O'Hara, an investor in Shuffle Master, became the company's first employee and helped bring the business to Las Vegas.

Meanwhile, Bob Pietrosanto, Galaxy's sales manager, is also a former Shuffle Master veteran.

Unlike Shuffle Master, table game equipment, such as automated card shufflers and table game management systems, is not part of Galaxy's business plan.

"We have great products and we have a good distribution system," said Saucier, who was an investor in the Washington casino when he developed Lucky Ladies. "But we need a great distribution system and that why we're doing (the public offering)."


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