WMS has weathered it all; its predecessor was founded in 1943 as a pinball manufacturer, a business WMS didn't give up until 1999. At various times WMS has made jukeboxes, coin-operated arcade games and even the popular "Mortal Kombat" video game, which was developed by its former subsidiary Midway Games. It entered the slots business in 1994.
WMS had long been affiliated with Sumner Redstone, the media mogul who controls CBS Corp. and Viacom Inc., and who had been an investor since the 1980s when it was a penny stock. Redstone's National Amusements Inc. cut its holdings in WMS substantially in 2009 to 4.9 percent. (According to the company, Redstone is no longer a shareholder.) Since then, the stock has had ups and downs. In the last year or two, it mostly has been down, which some analysts have blamed on the release of slot machines that were too complicated.
"They released this game called 'Clue,'" said Brian McGill, a casino analyst with Janney Capital Markets. "It took you 20 or 30 minutes to figure out what you were actually doing when you were playing it. They took their games and made them too advanced. They lost their way, and they lost market share."
But McGill is optimistic. He argued WMS is in strong financial shape, has a slew of new and simpler products, and can afford to take some of its revenue and invest it in online gambling. And if it doesn't work, he said WMS' core business shouldn't be affected.
According to the Roth-Fantini quarterly slot survey, WMS is the third-largest American slot machine manufacturer, with a 17 percent market share in the second quarter of 2012. It trails IGT and Bally Technologies.
In its annual report, filed Aug. 21, WMS included a chart showing that shareholder returns in 2012 had outperformed its peer group — which consists of Aristocrat, Bally, IGT and Shuffle Master — though not the Standard & Poor's 500.
Yet revenue and net income fell year over year. The company reported $689.7 million in revenue in fiscal year 2012 compared with $783.3 million the prior year. Over that same span, net income fell to $64.1 million from $81 million. Since Aug. 1, at least four major financial firms have downgraded the stock. Deutsche Bank's September downgrade caused the stock to fall nearly 7 percent in one day to $15.99. It closed at $16.65 Friday.
"We just don't know how profitable online gaming is going to be," McGill said. "No one knows what it is. Right now, there's this social aspect where you play for free, you lose fake money, and then you spend real money to get more fake money to go play online slots. Are people going to be playing online slots for free two to three years from now? Is it a fad? Like these games Zynga puts out?"
Edidin and Levin say they have a multipronged plan for making money online and girding against fads.
First, the consumer isn't going to see WMS or the Williams brand on any online casino or game. Instead, Edidin plans to pull from WMS' reservoir of successful slot-machine concepts, such as "Jackpot Party," and adapt them for online casinos.
And they're going to have a tailored approach for each jurisdiction. In the U.K., for instance, Williams operates an online casino outright. In Belgium, the plan is to operate online casinos for existing land-based casinos that can't afford to or don't have the technical expertise do so on their own. And soon Williams will deploy a third strategy in Europe, licensing its slot programs to online casinos and taking a cut of the profit those games make.
Levin said the company typically faces six to eight competitors each time it bids to license a game to an online casino. The business requires a ton of software engineering. The online casino, for instance, must be able to verify a player's age and location. So WMS has gone out and acquired two companies this year — Iowa-based video game developer Phantom EFX and online game developer and distributor Jadestone Group, based in Sweden — to help fill technical needs.
"If they're right, it does make sense to spend now on something that could pay off in the next three to five years," McGill said. He later added: "Only until you get a big state like California or New Jersey behind it — only until you cross that goal line — are people going to understand how big it could be for a company like WMS."