Name: Howard S. Cohen
Age: 54
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Position: President and chief executive officer, GTECH Holdings Corp.
Background: Prior to joining GTECH in March 2001, Cohen was president and chief executive officer of the Illinois-based Bell & Howell, which is made up of the company’s Mail Messaging Technologies and Imaging business units. Prior to Bell & Howell, Cohen was president, chief executive officer, and chairman at Sidus Systems, Inc. in Toronto, Canada. Previous to that, Cohen served as president, chief executive officer, and chief operating officer at Peak Technologies Group. Cohen also spent four years as president of OCE Office Systems, Inc., a U.S. subsidiary of the Netherlands-based OCE Corporation. He has also held senior management positions at U.S. Sprint and Arrow Electronics and spent 15 years at Xerox.
Education: Kent State University (1968)
Family: Married; two sons, one stepdaughter
Residence: Providence
The West Greenwich-based GTECH Holdings Corp. processes as many as 15,000 to 20,000 transactions per second. That’s more transactions than Visa, Master-Card and American Express combined around the world. The company handles over $125 billion in lottery transactions per year.
PBN: How would you describe the GTECH you took over six months ago – and what are your priorities in terms of managing the company now?
COHEN: When I joined GTECH, there were certain kinds of companies that I was interested in joining. There were certain criteria I guess I was looking for in my next assignment. I was looking for a company that was dominant in its field, which GTECH is – with 70 percent market share. And if you look at the overall market and the revenues and the POS (point of sale) devices, we’re probably closer to 80 or 85 percent. I was looking for a company that was dominant not only in market share, but in the technology it provides. GTECH continues to be a strong technology leader within the support of the lottery services around the world. I was looking for a company that was profitable. There are a lot of companies you get recruited to – but not every company is profitable. This company, even in the poorest of days, has always been successful from an operating income perspective and has a lot of potential to be even more successful in the future. I also wanted to work for an old fashioned company – one that actually has real cash flow. GTECH is projecting $70 million to $90 million in pre-cash flow and that today has become very popular with the investment community.
What makes cash flow so important?
If you don’t have cash flow, number one, you are borrowing a lot of money. Number two, you don’t have money for investments either in your own technology or your business or to move into other avenues of expansion. To me, that’s important because it shows the health and vitality of the company. Another thing that was important to me, was that I had had worked for companies that had both reoccurring revenues and those where you would wake up on the first of the year and you had to find every new dollar for the year. GTECH is a very interesting company in that 100 percent of the revenues for next year are already basically in our revenue stream. This is a company, where I can make change, but while I am making change, the company can still be successful. I was interested in going to a company that had a strong management team and I actually interviewed the senior management before I accepted the job here. I was both pleased then, and even more pleased now, that the people who we have in place running this company – because of some of the controversies the company had – stepped up to the challenge and are successful.
How common is that for someone in your position to actually interview senior management before signing on to the job?
If you are going to go work for a company, you want to make sure you do your due diligence. Due diligence is not just looking at the balance sheet and lo
oking at the financial records that are published. But also, did I feel comfortable working with the management team? Did I feel that the management team was one where I could work with to really change the direction or grow the business? I have been in turn-around situations and I have had to change as much as 70 percent of the management team. I really didn’t want to do that here. I am more than satisfied with the management team.
What are the primary products and services that GTECH offers?
Most people think of GTECH as a lottery company, but in truth what we are is an Information Technology company that provides management solutions to governments, jurisdictions and states around the world. We provide central systems and we write the code for central systems. We provide networks and manage those networks for states and governments around the world. We manufacture and assemble point of sale devices that provide the ticket and the transaction. We have 4,500 people who really provide those kinds of services. But we’re much more of a technology company than a lottery company. That’s one of the things I am really trying to get our organization to understand – how much of a value that we provide to governments around the world and we’re now moving some of our company to look at how we can provide other services especially in remote and emerging countries. We can provide financial services, they can pay utility bills, buy a phone card, pay taxes – all of which you can do because of our system. It is an opportunity to expand our horizon.
How many people do you employ in Rhode Island?
It fluctuates because of manufacturing, but it’s about 1,000 people. Sometimes it’s 1,100.
And you now have several locations?
There are four buildings. We’re here in West Greenwich, there are two facilities in Coventry, and we’re in Warwick.
How specifically does a recession impact how GTECH operates?
A recession is kind of interesting for GTECH. We help manage and provide solutions to governments around the world, specifically in the lottery business. Now that states are looking for additional revenues, and countries are looking for additional ways to generate taxes, the lottery becomes an opportunity. So we’re almost counter-cyclical to the recession that is going on right now. If anything, we see some opportunities. New York State, is a good example, where they just approved VLTs (video lottery terminals) and multi-state lotteries, which includes Powerball and Big Game And what that means to us is that we have opportunities to increase our revenues by providing additional services. So the recession may be difficult for most businesses, but historically, recessions have seen our revenues actually remain flat or improvewe always have to make sure we aren’t being overly aggressive or spending money unnecessarily. But we will not be impacted like most companies in this downturn.
So much of your business is done outside of the United States. What is the health of the economies in other parts of the world?
Forty-seven percent of our revenues are international. We are truly an international company. In some respects we are naturally hedged because we are around the world and so depending on the different currencies we get a natural balance. A good part of our business is in Brazil and the real (Brazilian currency) has had some issues, so that impacts us. We’re always watching currency. We’re always worried about where the dollar is versus other currencies. But generally speaking, as the recession has hit the U.S., it has hit the rest of the world. And so the rest of the world is looking to increase its tax revenues just as much as the U.S.
Do you personally have an opinion as to whether Rhode Island should allow for the expansion of slot machines at Lincoln Park and Newport Jai Lai?
We would prefer that the states take the actions they deem necessary for their revenue growth and we would always be there if it fit our base of support.
So you wouldn’t get out in front
No. Like I said, we’re really an Information Technology company that provides solutions to governments. Once they make a decision that they are going to go in a certain area they made us to help support that decision.
How would you describe your management style?
Very involved. I believe you need to put some disciplines and processes in place. I’m really looking for the management team to take on most of the responsibility and be able to make decisions that are right for a proper balance. I tell people that we really work for the customer or the end user, which is a state or local jurisdiction around the world. We work for all of our employees to make sure it is a good place for them to work, to have a career and to develop. We also work for our shareholders. And we must ensure that those stakeholders – the bondholders or shareholders – have a proper return on their investment. I try to bring a vision and discipline to the organization.
Are people getting used to your style?
I’ve only been here for six months. I’m sure they’re still getting used to me.
What drives you every day – gets you excited about going to work in the morning?
I think I work for a great company that is in a very interesting and exciting space. The challenge is to change our company over time because our revenues have been at a flat level the last couple of years. The challenge is to grow the top line profitably and still return the kind of shareholder value that our stakeholders are looking for. That gets me up in the morning.
