Evaluating New Profit Centers

In considering new profit centers based on either expanding a category or entering a new category, we begin with a simple question: How does each new product ultimately add to our profitability?

When evaluating new product opportunities, we are guided by four categories: margin, intellectual property, distribution channel and return- on-investment. First and foremost, we seek high margins and minimal competition. This generally leads us to design our products for specific niche markets. In doing so, we avoid the primary danger of an increase in productsa decrease in specialization, or the corollary problem of moving toward less innovative, lower margin commodity products. In this analysis we are much less concerned with growing revenue for its own sake than we are with the profitability of the revenue generated.

To protect our unique products, we take advantage of the only legal form of monopoly in the United States and elsewhere in the world, namely patents. One characterization of our company is that we are in the business of commercializing our growing portfolio of intellectual property. Within 12 years , we have over 125 issued patents and over 100 pending patents. Patents provide a significant barrier -to-entry for competitors . We add further protection through our numerous trademarks and copyrights.

Considering your distribution channel is also essential to finding potential products and profit centers. Although we operate in five business categories, all of them are in the general category of Casino Equipment. Our regulatory licensing, sales force and reputation for quality and service have been built by selling into this channel. As we evaluate new opportunities, it is important to be mindful of the competitive edge that we have built in this business area and not stray from this strength. In exploring new opportunities, you must maintain the same strong points that made past ventures successful.

Finally, we analyze each opportunity for its return-on-investment. Before a business segment is accepted, you must carefully examine the costs associated with entering and maintaining it. We generally favor low risk, low investment opportunities over capital- intensive products.