Bally Sells Casino, Lowers Outlook

Bally Technologies is selling its Rainbow Casino to Isle of Capri and says it expects 2010 earnings to come in lower than expected.
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(Bally Technologies article updated with analyst commentary and stock movement.)

NEW YORK (

TheStreet

) -- Slot machine maker

Bally Technologies

(BYI)

announced after the bell Monday that it is lowering its 2010 outlook and selling off Rainbow Casinos to

Isle of Capri Casinos

(ISLE)

.

Bally now expects full-year earnings in the range of $2.15 to $2.20 a share, down from its prior outlook of $2.30 to $2.55 a share.

Separately, the company said it will sell its Rainbow Casino in Vicksburg, Mississippi, for $80 million in cash to Isle of Capri in an effort to focus on its core business.

Bally also reported that is working with its bank group to amend its credit agreement and authorized a $150 million share repurchase plan replacing the previous one.

Shares of Bally are falling 3.6% to $40.81 in morning trading, but analysts still remain bullish on the stock.

"This is only a short-term issue for Bally," Sterne Agee analyst David Bain says.

New products, like its Alpha II, should give Bally momentum going forward. The Alpha II is Bally's first new platform in five years, Bain says. There is also a backlog for its Cash Spin wheel.

"Bally was seeing lower multiples than its peers since it wasn't a pure-play technology company," Bain says. "The divesture of Rainbow should help its multiple."

Bain says stock declines present an excellent entry point, especially over the next three to six months. He maintains his buy rating on the stock.

J.P. Morgan analyst Joseph Greff also reaffirmed his overweight rating. Greff says Bally will have some new opportunities in expanding gaming markets like Italy, Maryland, Illinois, Kansas, Ohio, New York's Aqueduct and Canada.

Isle of Capri is advancing 7.9% to $9.45, as Rainbow Casinos represents a good chance for the casino operator to round out its portfolio for a good price.

-- Reported by Jeanine Poggi in New York.

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