International Game Technology's

(IGT) - Get Report

shares caught a delayed bid Wednesday, one day after the company announced it would start selling its slot machines to Indian casinos.

The shares were recently up $1.54, or about 5%, to $33.85 in fairly heavy trading, near their 52-week high of $34 and up 75% on the year. The runup followed research from Jefferies & Co. in which the brokerage slapped a buy rating on the shares because of the company's plan to sell so-called Class II gambling machines to Indian casinos.

Until now, the National Indian Gaming Commission, the regulatory body established by Congress to oversee gambling at Indian sites, has interpreted existing law to mean the definition of Class II gambling quipment "specifically excludes slot machines." As a result, companies like IGT have avoided the Class II market in fear of violating the law and losing their licenses to sell Class III devices, like those found in Las Vegas casinos.

According to Jefferies, the NIGC recently issued a new interpretation of the law that essentially allows Indian casinos to have slot machines, creating a substantial growth opportunity for IGT. A closer reading of the NIGC opinion indicates that electronic machines such as slot machines can be used in gaming that falls under arcane interpretations of the rules of "bingo," Jefferies said, adding that IGT is poised to grab 70% of the 20,500 machine Class II market. In 2003, IGT sold about 33,000 machines worldwide.

A company that may need to worry is

Multimedia Games

(MGAM)

, currently the leader in Class II games. Multimedia's stock opened down 45 cents to $37.25, but is still near its 52-week high.

The casino news overshadowed a strong fourth quarter reported Tuesday by IGT. For the quarter, the company earned $108 million, or 31 cents a share, on revenue of $273 million -- a penny ahead of analyst expectations after backing out discontinued operations. For the year, the company earned $375 million, or $1.07 a share, on revenue of $1.1 billion.

Operating results were positive across the board and analysts were also pleased that T.J. Matthews, brought in as part of the Acres Gaming acquisition, was appointed chief executive. Machine volume grew by over 2,000 units, while both gross profit and gross profit margins also showed substantial growth. The only area of decline was a drop in international machine sales in Australia and the U.K., but management indicated that they are comfortable with 2004 earnings estimates.