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Howard Stutz
After hire some ask, 'What's IGT thinking?'
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Updated: Feb. 19, 2012 | 9:40 a.m.
A major car manufacturer wouldn't hire an executive from Victoria's Secret to design automobiles. Nor would an international oil company bring aboard someone from Baskin-Robbins to plan growth initiatives.
So why does the gaming industry's largest slot machine manufacturer believe it can stock its corporate offices with executives who have little if any experience in the casino business?
Ten days ago, International Game Technology named John Vandemore as chief financial officer, the person who explains the company's financials and strategic goals to Wall Street.
Vandemore comes to IGT from Walt Disney Co., where he was CFO of Imagineering, Disney's theme park development arm. Vandemore also worked for investment banker Goldman Sachs and accounting firm PricewaterhouseCoopers.
The problem is that the current roster of gaming analysts doesn't know him.
Since taking over as chief executive officer nearly three years ago, Patti Hart has filled IGT's corporate offices with executives from IBM, Microsoft, Broadbank Interactive Television, and SunGard Availability Services.
Hart spent years with California Silicon Valley technology firms before joining IGT's board in 2006.
"I now have six years in the gaming industry," Hart said last week. "I believe that qualifies my experience."
Hart wants IGT viewed at as a gaming technology provider. In December, the company unveiled the IGT Cloud, an information service that delivers slot machine content to casinos around through a network, the next step beyond server-based gaming technology.
Explaining technology to a Strip casino president is not the same as selling computers. That's one reason slot machine floor managers were reluctant to embrace server-based gaming. They were afraid it would confuse customers.
So wouldn't it be nice to have someone speaking for IGT who has at least set foot in a casino once or twice in his or her career?
Many gaming insiders are perplexed by IGT's hiring and the exit of longtime executives with years in the gaming industry.
"I'm really not sure what's going on over there," said one Wall Street analyst who follows the company but who did not want to be named because he had not published any comments on the new CFO. "I have a lot of questions to ask Patti."
Hart said her hiring method is simple. She wants best executive from any industry if she believes that person can make IGT a better company.
"We go after the best athlete available," Hart said. "It really doesn't matter where you get your experience. We have brought on board a lot of people with strong capabilities."
Rival slot machine manufacturers, such as Bally Technologies, WMS Industries, Konami Gaming and MultiMedia Games, are watching things unfold with amusement. Any dip in IGT's sales means marketshare gains for the competition.
IGT does have one ace in the hole, so to speak. Longtime gaming figure Philip Satre is chairman of the company's board. He's backed Hart in the past and shows no signs of changing his position.
Hart has support on Wall Street for her company remake.
JP Morgan gaming analyst Joe Greff said he didn't know the new CFO. But he didn't view the change "as incrementally increasing execution risk or creating any incremental issues."
Macquarie Securities gaming analyst Chad Beynon said new management had "reinvigorated" shareholder interest.
"IGT (is) a different type of company," Beynon said, "more akin to a technology conglomerate versus a traditional slot vendor."
One issue concerning analysts and investors is IGT's $500 million purchase of social gaming giant Double Down Interactive, which developed Facebook's Double Down Casino.
Union Gaming Group principal Bill Lerner speculated that the move would lead IGT to launch an online gaming website in the United States that could contend with casino operators -- buyers of IGT's slot machines.
"IGT has no plans to operate an online casino in Nevada and compete with our customers," Staci Alonso, IGT's vice president of marketing, said in a Jan. 17 email.
Alonso, ironically, is one of the few IGT corporate executives with years of hands-on gaming experience.
Stifel Nicolaus Capital Markets analyst Steven Wieczynski said the CFO hiring had more to do with replacing Pat Cavanaugh, who was one of the last upper-management employees who worked under previous IGT management, than with the Double Down deal.
"We have thought for some time that Ms. Hart would look to bring someone into the CFO position that she hand-picked," he said.
Whether IGT's corporate office restructuring turns out to be goofy is up for debate.
Howard Stutz's Inside Gaming column appears Sundays. He can be reached at hstutz@reviewjournal.com or 702-477-3871. He blogs at lvrj.com/blogs/stutz. Follow @howardstutz on Twitter.
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Some Trivia:
Patti Hart is repeating her dismal performances as CEO at Pinnacle Systems, Excite@Home, Telocity and her present dismal performance as a Yahoo board of director.
Patti Hart either laid off or forced out all the engineers that wanted to grow the casino gaming business at IGT. Those engineers were working on very low power, thin client ARM based gaming tablets, cloud computing and wireless in casinos, long before those concepts were glimmers in Apple’s eye. Patti Hart threw all that technology into the dumpster in favor of spending many hundreds of millions of dollars on sBx, which IGT will probably never be able to re-coup its expenditures on.
It would interesting if some one took on the exercise of working out all the honest salaries she took from laying off mid & snr managers and passed on to her executive board for doing such a great job !!
It will be a miracle if IGT survives Patti Hart at the helm, but Pinnacle, Excite and Telocity didn’t survive Patti Hart as CEO and Yahoo will not survive.. While domestic numbers were down, International was picking up.. now she has managed to also kill off International business with her strategy and new hires
Great to see someone finally catching on to Ms Hart's deep distrust of hiring anyone one coming from gaming! There is virtually no-one left with any idea in gaming in IGT's executive team. Patti believes this is a backwards industry that need transforming, hence every quote of hers talks of transforming gaming , not IGT...Say days indeed
I guess changing the whole board and removing people with experience and knowledge buys you more time in the helm.. and who ever can quickly align through the smoky mirrors in place can ride the wave.. The results, customer confidence, stock price , and staff retention domestic & international may just be another key indicator ... "in a weird way you can see the Italian captain been the first off the sinking ship"
I guess changing the whole board and removing people with experience and knowledge buys you more time in the helm.. and who ever can quickly align through the smoky mirrors in place can ride the wave.. The results, customer confidence, stock price , and staff retention domestic & international may just be another key indicator ... "in a weird way you can see the Italian captain been the first off the sinking liner "
Server based gaming or cloud computing in an industry that is as progressive as its weakest regulatory environment. Nevada may benefit and a couple of other progressive jurisdictions but server based gaming is just sitting out there because regulators in some jurisdictions have no clue how to audit or report it. What is unknown is unapproved. AC was 40 years behind in it's regs, look how its working out for them! IGT once had 55% of the floor but big blue is losing perspective if you can't see that since the economy collapsed reinvestment on the floor is less that 10% per year in most casinos. How long to convert to a SBG infrastructure? Solid gaming product keeps your stock price solid. Mickey Mouse execs can't deliver the short term. IGT cloud? To quote Jim, "Play-offs? Are you kidding me? Play-offs?? I just hope we can win a game!"
So, I guess Gary Loveman wasnt qualified to run Harrahs?
Wrong Hack. You hire the MBA and groom him to take the higher job. Hiring old retreads from other companies gets you nowhere.
At the end of the day, gambling is entertainment. Disney is one of the largest, if not the largest, entertainment companies in the world. Why wouldn't this be a great career move for Mr. Vandemore; and a great hire for IGT?
If you owned a casino, would you hire an executive who had been in the business 20 years and worked their up or a college grad with a MBA? I'd go with the experience. Education is fine but nothing beats practical knowledge.
If internet gaming goes global, or when I should say, IGT will benefit from the technological expertise that Ms. Hart and her new appointees bring to the table. As black.chip stated, if you can run Disney, you can run a gaming company. The casino experience isn't what it used to be - customer service has been downsized so much over the years. Occasional players will save their travel dollars and play on-line instead.