IGT chosen to replace Quebec video lottery terminals

QUEBEC, Canada -- A Canadian province has awarded Reno-based International Game Technology a contract to replace at least half of the government-run video lottery terminals in an agreement analysts touted as one of the largest gambling equipment deals available this year.

IGT will share the replacement of 12,000 VLTs in Quebec with Canadian-based Spielo, which will also provide Lotto-Quebec a central operating system for the games. VLTs are similar to slot machines but a central server dictates the outcome.

According to a statement from Lotto-Quebec, the province will spend $265 million to replace its games, which are installed in licensed bars, restaurants and taverns throughout the province. The machines are expected to be replaced in 2012.

Analysts predicted that IGT's share of the contract could end up being a little more than half of the 12,000 machines and the revenues from the sales could be worth between 7 cents to 9 cents in the company's quarterly earnings per share.

Janney Montgomery Scott gaming analyst Brian McGill said the transaction was positive news for IGT, but he is still concerned that there isn't much of a growth pipeline in the American slot machine market.

"Of the provinces that will be replacing VLTs over the upcoming cycle, Quebec was the largest opportunity for the equipment manufacturers," McGill told investors. "For IGT, while this is certainly a positive event, we do not believe it is enough to change us from our newly established 'neutral' stance on the stock."