TWST: Would you tell us about the outlook in Macau and other parts of Asia?
Dr. Yoseloff: Macau is the crown jewel of Asian gaming right now, and a lot has been said about the growth of gaming in Macau, which has been nothing short of dramatic. Once the enabling legislation was passed in Macau, the growth of that market was faster than any gaming market ever, so there has been a lot of focus on Macau. We are a leading supplier in Macau because it's a table-centric market, and because we are the gaming industry's leading live table game product supplier. But on top of that, there is a growing demand for electronic wagering there, and we're also a major player in that market. So when you look at the installation of table gaming products in Macau casinos, Shuffle Master is extremely well represented, and since we also make slot machines for the Asian market through our Australia subsidiary, we're represented in every gaming category there. As a result, very often we are the leading supplier to the new casinos being built there.
TWST: What other parts of the world look interesting to you?
Dr. Yoseloff: Let's stick with Asia for a minute, because although Macau is its crown jewel, there are many gaming initiatives going on in Asia right now that look promising. We have the advent of gaming in Singapore, Japan considering introducing casino style gambling, gaming growth in the Philippines and throughout other areas in Asia, and there are efforts underway to introduce gambling in parts of Taiwan. Overall, the Asian market will experience enormous growth over the next five to 10 years. There are also other gaming expansion initiatives taking place in other parts of the world where gaming exists in one form or another. The current UK market is a good example, where in addition to the small traditional casinos that are common throughout the UK, there is going to be broad expansion to include Las Vegas-style, mega-resort casinos. Manchester was recently selected as the first location, and different companies in the UK are looking for other locales. Eastern Europe also represents a potential growth market, and we are currently waiting to see what the regulations might look like in those emerging markets. Because the gaming industry in the US is very highly regulated and US-based companies must meet stringent licensing requirements, there are gaming markets where, although we could do business now, we prefer to wait until the regulations have been finalized to ensure we don't put our US-based licensing at risk. US-based gaming companies pride themselves on their integrity and the integrity of their products, so we are very cautious as we explore entering some of these markets.
TWST: What are the main things on your strategic agenda as you look ahead over the next three to five years?
Dr. Yoseloff: We've taken a lot of big growth steps in the last several years, including several acquisitions. Shuffle Master today is nothing like the Shuffle Master of even just a few years ago, as far as the size of our company and the opportunities facing us. Our strategic agenda is all about execution at this point, so we are heavily focused on exploiting opportunities that we have created for our company. Because we are concerned with the operational issues related to just being a much bigger company, a substantial part of our focus is to gain the kinds of efficiencies and bottom-line growth that will derive from all the strategic initiatives we've put in place. Our focus is very heavily in that direction. People ask me, "What's the thing that concerns you most about the company?" and my answer always is growth itself. There is no shortage of great growth opportunities for us now, but there certainly is a challenge for us operationally to guarantee that as these businesses grow, we have the appropriate infrastructure, people and systems to take the greatest advantage of the opportunities that are now presented.
TWST: Are there any real problems to worry about over the next few years?
Dr. Yoseloff: There is always something to worry about, but as I said earlier, the most important issue is managing growth itself. People who have not been involved in the kind of explosive growth that Shuffle Master has gone through don't necessarily realize how important those challenges can be. So we are very sensitive to those issues and assuring that our supply pipeline is always there. We bought a company a couple of years ago in Austria. They were a competitor in the shuffler business, and given our size, it was a very big acquisition for us. Obviously, they did business in Europe and we realized that our accounting system was incapable of accounting in two currencies, so we had to very quickly implement a substantially more sophisticated system that could account for the acquisition we had made. Of course, given the rules regarding the timeliness of accounting, we didn't have a lot of time to implement these major changes. If you are already a big multinational company doing business in many places, you don't concern yourself with that. You know as a CEO that if you make this kind of acquisition, your accounting folks will be able to do the accounting, but when you are small and growing at this pace, you have to worry about those kinds of things. It's a very simple example, but it gives you the flavor of the day-to-day concerns that this kind of growth can engender. It's the most exciting kind of business that I can imagine, and we pride ourselves on our ability to take these various challenges, master them, and move on to our next opportunity.
TWST: What would be the two or three best reasons for the long-term investor to look very closely at Shuffle Master?
Dr. Yoseloff: I think there are a number of very positive reasons why Shuffle Master is a good investment. First, it has returned very handsomely for those who invested early, and should continue to do so. I don't think there is any company that is better positioned now to take advantage of the major growth that will be coming in gaming over the next few years. Shuffle Master is the industry leader in some of the fastest-growing categories in our business, and the gaming industry itself is growing faster than at any time in its history. Second, the strong intellectual property protection that surrounds our entire product portfolio gives a strong guarantee that Shuffle Master will continue to hold leadership positions in these categories well into the future. Third, we have a conservative balance sheet and a strong management group that has been with the company for a very long time. They understand our business extremely well, and have a proven record of capability and execution. I don't think you could ask for much more than that. We have a very strong proven track record already. Therefore, you are not investing in an unknown here - you are investing in a very well known, very well respected company. You are getting growth and value rolled into one here.
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