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When two of the most powerful chief information officers in the gaming business met last July to discuss a merger that could reshape the industry landscape by creating the world's largest casino company, they chose a surprisingly pedestrian venue. They had breakfast at a local Denny's.

"I felt like some Amway guy, ordering the Grand Slam breakfast," says Tim Stanley, senior vice president and CIO of Harrah's Entertainment Inc. But Stanley knows from previous takeovers that it helps to have a good relationship with his counterpart at the acquired company, in this case CIO Carol Pride of Caesars Entertainment Inc. After all, integrating information systems will be critical to the success of Harrah's proposed $9.4 billion acquisition of Caesars. And without Pride's help, Stanley's job will be considerably more difficult. On this deal, however, building those bonds may take some finesse. Says Pride, "It's safe to say that his executive team is more excited about this transaction than mine is." Denny's, besides being convenient to both of their homes, was, as Pride notes, "a neutral site."

Stanley's meeting with Pride is just one example of Harrah's distinctly non-gambling approach to acquisitions. The company performs exhaustive due diligence, even consulting Stanley on the technology issues it is likely to encounter. That said, Stanley brings a certain Las Vegas swagger to his job. "We're a growth company," he says of the big casino and hotel operator, which has acquired five rivals in the last six years. "We have acquisitions down to an art, and I think we can take on just about anything."

Harrah's Take
Company | Harrah's Entertainment
Corporate Headquarters | Las Vegas, NV
Senior Vice President and CIO | Tim Stanley
Revenues | $4.42 billion (trailing twelve months)
Profits | $305 million (TTM)
Stock performance | 52 week high-low: $57.50–$40.85 Oct. 8: $54.09

Source: Harrah's; Yahoo! Finance

The proposed purchase of Caesars is Harrah's biggest target yet. The two companies are about the same size, although Harrah's is far more profitable, with $292 million in net income last year on $4.3 billion in revenue, versus profits of just $46 million for Caesars on revenue of $4.4 billion. Pending regulatory approval—a process that could last well into next year—the combined company would be the largest in the gaming industry, with more than 50 casinos around the world. No problem, says Stanley: Absorbing new talent and technology assets is one of the things his organization does best.

Should the deal go through, Stanley's job will be to create a single information technology department that can support the combined company, without missing a beat in powering ongoing operations. Information technology is critical to the casino business, and Harrah's can't afford to stumble through the integration process: The company is still in the process of digesting Horseshoe Gaming, the Las Vegas-based casino company it bought for $1.45 billion earlier this year.

Casinos rely heavily on IT to drive both revenue and profits. "There is a huge marketing component to the casino industry," says Andrew Zarnett, a managing director at Deutsche Bank Securities, in New York, who covers the gaming industry. "Database marketing is very important in reaching and understanding customers—their level of play, frequency of play, where they prefer to play—so companies can create offers specific to a particular customer's wants. Reach the customer with the proper offer, it drives revenue."

Harrah's Chief Executive Gary Loveman believes that the current wave of consolidation in the casino business will ultimately result in just two large industry leaders. He plans on Harrah's being one of those behemoths. Buying Caesars would position Harrah's as the worldwide alternative to the rival giant proposed last June by the planned merger of MGM Mirage and Mandalay Resort Group, which, if approved, will have 28 casinos and $6.5 billion in revenue. For a company such as Harrah's, which has widespread operations, the ability to drive customers from one Harrah's location to another will be critical. IT-intensive rewards programs that help create brand loyalty across the chain are a key to its strategy.

Harrah's is ready for its biggest integration challenge, says Stanley, in part because IT has been in the loop from the beginning. "We have a formal business development team that reports to [Chief Financial Officer] Charles Atwood," he says. "I'm generally involved in the strategic planning discussions as they consider our growth options, and bring in ideas that fit our requirements." As a potential target comes into focus, Stanley will discuss it in detail with CEO Loveman. "[Loveman] says, 'Could we do this?,'" says Stanley. "We talk it through, I tell him how I would do it, and what I need to get it done."

Could Stanley kill a deal that didn't look like it would work from the technology end? "I probably could," he muses, although as yet no such dramatic intervention has been required.

This article was originally published on 10-15-2004
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