The following MDA is intended to enhance the reader's understanding of our operations and current business environment from the perspective of our company's management. The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended September 30, 2012, as well as the accompanying Consolidated Interim Financial Statements and Notes included in Item 1 of this Form 10-Q.

Our MDA is organized into the following sections:

· OVERVIEW

· CONSOLIDATED RESULTS

· BUSINESS SEGMENT RESULTS

· LIQUIDITY AND CAPITAL RESOURCES

· RECENTLY ISSUED ACCOUNTING STANDARDS

· CRITICAL ACCOUNTING ESTIMATES

Unless otherwise indicated in this report:

· International Game Technology, IGT, we, our, or the Company refers to International Game Technology and its consolidated entities

· italicized text with an attached superscript trademark or copyright notation indicates trademarks of IGT or its licensors, and additional IGT trademark information is available on our website at www.IGT.com

· references to years relate to our fiscal years ending September 30

· current refers to our fiscal first quarter ended December 31, 2012

· Note refers to the Notes of our Consolidated Interim Financial Statements in Item 1 of this report

· references to EPS are on a diluted basis

· table amounts are presented in millions, except units and EPS

· discussion and analysis relates to results for continuing operations of the current first quarter as compared with the prior year first quarter

We sometimes refer to the impact of changes in foreign currency exchange rates, which results from translating foreign functional currencies into US dollars, as well as currency transaction remeasurement, for reporting purposes. The impact of foreign currency exchange rate fluctuations represents the difference between current rates and prior period rates applied to current period activity.

FORWARD LOOKING STATEMENTS

This report contains statements that do not relate to historical or current facts, but are "forward looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to future events or trends, our future prospects and proposed new products, services, developments, or business strategies, among other things. These statements can generally (although not always) be identified by their use of terms and phrases such as anticipate, appear, believe, could, would, estimate, expect, indicate, intend, may, plan, predict, project, pursue, will, continue, and other similar terms and phrases, as well as the use of the future tense.

Examples of forward looking statements in this report include, but are not limited to, the following categories of expectations about:

· our ability to successfully introduce new products and their impact on replacement demand

· the timing, features, benefits, and expected continued or future success of new product introductions and ongoing product, marketing, and strategic initiatives

· our expected future financial and operational performance

· our strategic and operational plans

· our leadership position in the gaming industry or in online casino-style social gaming

· the advantages offered to customers by our anticipated products and product features

· economic conditions and other factors affecting the gaming industry

· gaming growth, expansion, and new market opportunities

· expected trends in the demand for our products

· developments with respect to economic, political, regulatory and other conditions affecting our international operations

· mergers, acquisitions and divestitures, including the expected benefits of completed acquisitions and expectations for, possible acquisitions of, or investments in, businesses, products, and technologies

· research and development activities, including anticipated benefits from such activities

· fluctuations in future gross margins, tax rates, and liabilities

· increasing product sales or machine placements

· legislative, legal or regulatory developments and related market opportunities

· available capital resources to fund future operating requirements, capital expenditures, payment obligations, acquisitions, and share repurchases

· losses from off-balance sheet arrangements

· financial returns to shareholders related to management of our costs

· the impact of recently adopted accounting pronouncements

· the outcome and expense of litigation

Actual results could differ materially from those expressed or implied in our forward looking statements. Our future financial condition and results of operations, as well as any forward looking statements, are subject to change and to inherent known and unknown risks and uncertainties. See Part II, Item 1A, Risk Factors, in this report for a discussion of these and other risks and uncertainties. You should not assume at any point in the future that the forward looking statements in this report are still valid. We do not intend, and undertake no obligation, to update our forward looking statements to reflect future events or circumstances.

OVERVIEW

International Game Technology is a global gaming company specializing in the design, development, manufacture, and marketing of casino games, gaming equipment and systems technology for land-based and online social gaming and wagering markets. We are a leading supplier of gaming entertainment products worldwide and provide a diverse offering of quality products and services at competitive prices, designed to enhance the player's experience.

We manage our operations in two geographic business segments, North America and International, each incorporating all revenue categories-Gaming Operations, Product Sales, and Interactive. Gaming operations and interactive revenues are generated by providing our products and services under a variety of recurring revenue arrangements. Product Sales revenues are generated by the sale of our products or services. Certain unallocated income and expenses managed at the corporate level, comprised primarily of general and administrative costs and other income and expense, are not allocated to an operating segment. See BUSINESS SEGMENT RESULTS below and Note 15.

Summary Results

                                           First Quarter Ended December 31,
                                       2012            2011         C h a n g e
Revenues                            $    530.3       $  445.5     $  84.8       19 %
Operating income                         118.4           99.9        18.5       19 %
Income from continuing operations         65.3           50.3        15.0       30 %
EPS from continuing operations      $     0.24       $   0.17     $  0.07       41 %

All results reflected in the table above for our quarter ended December 31, 2012 improved due to an increase of $42.7 million or 72% in North America machine sales and an increase of $41.3 million in interactive primarily related to the addition of social gaming from our acquisition of DoubleDown in late January 2012. Income and EPS from continuing operations improved due to both increased revenues and a lower effective income tax rate of 33% versus 36% in the prior year quarter. EPS from continuing operations also benefitted from fewer shares outstanding due to share repurchases during 2012. See Note 14 for information about our share repurchases. For a more in-depth analysis of our 2013 first quarter results, see CONSOLIDATED RESULTS directly following this OVERVIEW.

Business Update

The gaming industry continues to be challenged by reduced discretionary outlays from players who remain reluctant to spend while enduring the global macroeconomic uncertainty. This is evidenced by the reduction in our gaming operations yields, which reflected lower play levels in our key markets. Increased competition and unforeseen events such as Super Storm Sandy in the eastern United States also negatively impacted yields. In product sales, these same global trends are inhibiting the willingness of our casino customers worldwide to order new gaming machines. However, increased VLT demand from various government lotteries in Canada and gaming expansion in Illinois contributed to improved machine sales during our 2013 first quarter. Outside of VLT unit demand from these markets, we expect our 2013 full year machine sales will be relatively flat to 2012.

With the acquisition of DoubleDown in January 2012, we have established a leadership position in interactive online casino-style social gaming and strengthened our core business with added distribution channels for IGT game content. Our DoubleDown Casino® revenues continue to increase each quarter and were up 15% in our 2013 first quarter over the 2012 fourth quarter. DoubleDown is presented as a component of North America interactive operations. As regulated markets legalize interactive online gaming, our strategic intent is to enter and do business in those markets that offer attractive return characteristics.

Strategic Objectives

We continue to partner with our customers in an effort to build stronger relationships and deliver innovative gaming products and services. We remain focused on strategic objectives designed to improve our business and increase shareholder value. For 2013, we remain focused on achieving the following strategic objectives:

· Reinforcing our leadership position in our core business

· Increasing revenues and profitability in international markets

· Propelling our game content across the broadest possible global network

· Returning capital to shareholders in a consistent, efficient manner

CONSOLIDATED RESULTS - A Year Over Year Comparative Analysis

                                          First Quarter Ended December 31,
                                      2012            2011         C h a n g e
Revenues                            $   530.3       $  445.5     $ 84.8        19 %
Gross margin                               58 %           57 %        1   pp    2 %
Operating income                    $   118.4       $   99.9     $ 18.5        19 %
Margin                                     22 %           22 %        -   pp    -

Income from continuing operations   $    65.3       $   50.3     $ 15.0        30 %
Discontinued operations                     -           (1.0 )      1.0         *
Net income                          $    65.3       $   49.3     $ 16.0        32 %

EPS
Continuing operations               $    0.24       $   0.17     $ 0.07        41 %
Discontinued operations                     -          (0.01 )     0.01         *
Net income                          $    0.24       $   0.16     $ 0.08        50 %

Quarters ended December 31, 2012 and 2011 compared

Total revenues improved 19%, driven primarily by increases of $42.7 million in North America machine sales and $41.3 million in interactive due to the addition of social gaming from our acquisition of DoubleDown. Gross margin increased primarily due to lower gaming operations costs and favorable changes in product mix, including additional contributions from higher-margin interactive business.

Operating income improved 19% primarily due to the increase in North America machine sales. Operating margin was flat, as increased operating expenses primarily from the addition of DoubleDown offset increased revenues. DoubleDown operating expenses included acquisition related charges of $17.5 million related to contingent retention bonuses and earn-out liability accruals. See OPERATING EXPENSES below for additional information.

Income and EPS from continuing operations improved, primarily due to increased operating income and a lower effective income tax rate as discussed below under "Income Tax Provisions." EPS additionally benefitted from the effect of share repurchases in 2012. See Note 14 for information about share repurchases.

Discontinued operations related to the sale of our UK Barcrest Group in 2011. See Note 16.

GAMING OPERATIONS

                                         First Quarter Ended December 31,
                                     2012           2011            Change
Revenues                           $   242.6       $ 252.0     $  (9.4 )      -4 %
Gross margin                              63 %          61 %         2   pp    3 %

Installed base (units '000)             56.8          55.6         1.2         2 %
MegaJackpots® (premium brand)           26.6          27.6        (1.0 )      -4 %
Lease (CDS, Racino, other)              30.2          28.0         2.2         8 %

Yield (average revenue per unit)   $   46.80       $ 50.58     $ (3.78 )      -7 %

Quarters ended December 31, 2012 and 2011 compared

Gaming operations revenues decreased 4% driven primarily by lower yield in Megajackpots® games, partially offset by higher yield and installed base growth in lease operations. North America revenue decline was partially offset by an increase in International revenues. Gross margin improvement was primarily due to lower jackpot expense and depreciation, as well as an increased mix of lower yield, but higher margin lease operations games. Yield decreased primarily due to lower performance in Megajackpots® games and an increasing mix of lower-yield lease units.

PRODUCT SALES

                                            First Quarter Ended December 31,
                                        2012            2011            Change
Revenues                              $   234.8       $  180.9     $ 53.9        30 %
Machines                                  157.5          115.7       41.8        36 %
Non-machine (systems, parts, other)        77.3           65.2       12.1        19 %

Gross margin                                 53 %           51 %        2   pp    4 %

Machine units recognized ('000) (1)        10.7            7.3        3.4        47 %

Machine ASP ('000)                    $    14.8       $   15.9     $ (1.1 )      -7 %

Machine units shipped ('000) (2)            9.3            6.5        2.8        43 %
New/expansion                               2.5            2.0        0.5        25 %
Replacement                                 6.8            4.5        2.3        51 %

(1) correlates with revenues recognized; (2) includes deferred revenue units

Quarters ended December 31, 2012 and 2011 compared

Product sales revenue grew 30% driven by increased North America video lottery machine sales. Machine units recognized increased 47%, primarily due to 1,100 new VLT units in Illinois and 1,600 VLT replacement units in Canada. Replacement machines increased 900 units in addition to the Canada VLT units. Machine ASP decreased 7% due to the increased mix of lower-priced VLT units. Non-machine revenues also increased 19%, primarily due to an increase of $10.4 million in IP license fees, in part due to a patent royalty settlement of $5.0 million. Gross margin increased primarily due to the increased mix of higher-margin non-machine sales, primarily IP license fees and conversion parts.

Deferred revenue decreased $6.2 million during the 2013 first quarter to $54.3 million at December 30, 2012, primarily related to obligations achieved under multi-element contracts. During our 2013 first quarter, we shipped 67 units for which revenues were deferred and recognized revenues for 1,394 units previously shipped, for a net decrease of 1,327 units in deferred revenue.

INTERACTIVE

                                           First Quarter Ended December 31,
                                       2012           2011            Change
Revenues                             $    52.9       $  12.6     $ 40.3        320 %
Social gaming                             41.3             -       41.3          *
IGTi                                      11.6          12.6       (1.0 )       -8 %

Gross margin                                58 %          52 %        6   pp    12 %

DoubleDown average user statistics
Daily active users/DAU ('000)            1,462           n/a
Monthly active users/MAU ('000)          4,931           n/a
Bookings per DAU (0.00)              $    0.31           n/a

Quarters ended December 31, 2012 and 2011 compared

Interactive revenue grew $40.3 million primarily as a result of our acquisition of the DoubleDown Casino® in late January 2012. DoubleDown's social gaming revenues grew 15% over the 2012 fourth quarter, resulting from increases in both average DAU (up 3%) and bookings per DAU (up 11%). These improvements were driven primarily by the introduction of IGT content to the DoubleDown Casino® on desktop and mobile platforms. This content was delivered through the integration of DoubleDown Casino® with IGT's proprietary rgs® enabling fast and efficient new game delivery.

IGTi real-money wagering revenues decreased 8%, primarily due to a decrease of $4.0 million related to the closures of European online turnkey and poker operations. An increase in online casino revenues of $2.9 million, primarily due to a 20% increase in the number of customers, partially offset the decrease from the closures.

Interactive gross margin improvement was primarily due to the favorable margin contribution from DoubleDown, which included $2.3 million of amortization expense for acquired developed technology.

OPERATING EXPENSES

                                              First Quarter Ended December 31,
                                                                       Favorable
                                         2012           2011         (Unfavorable)

Selling, general and administrative    $   100.2       $  89.7     $  (10.5 )     -12 %
Research and development                    54.4          46.9         (7.5 )     -16 %
Depreciation and amortization               19.0          15.4         (3.6 )     -23 %
Contingent acquisition related costs        17.5             -        (17.5 )       *
Total operating expenses               $   191.1       $ 152.0     $  (39.1 )     -26 %
Percent of revenues                           36 %          34 %

Quarters ended December 31, 2012 and 2011 compared

Operating expenses increased 26%, primarily due to additional investment in interactive business and technology. Interactive operating expenses increased $33.6 million, including contingent acquisition related costs of $17.5 million and amortization of acquired intangibles of $4.4 million related to DoubleDown. Additionally, bad debt provisions increased $7.4 million due to credit uncertainties on specific customer receivables.

OTHER INCOME (EXPENSE)

                                           First Quarter Ended December 31,
                                                                     Favorable
                                      2012            2011         (Unfavorable)
Interest Income                     $    11.3       $   12.0     $   (0.7 )      -6 %
WAP investments                           4.6            5.2         (0.6 )     -12 %
Receivables and investments               6.7            6.8         (0.1 )      -1 %

Interest Expense                        (31.7 )        (30.0 )       (1.7 )      -6 %
WAP jackpot liabilities                  (4.6 )         (5.2 )        0.6        12 %
Borrowings                              (18.5 )        (16.9 )       (1.6 )      -9 %
Convertible debt equity discount         (8.6 )         (7.9 )       (0.7 )      -9 %

Other, including gain (loss)             (0.3 )         (2.8 )        2.5         *

Total other income (expense), net   $   (20.7 )     $  (20.8 )   $    0.1         -

Quarters ended December 31, 2012 and 2011 compared

Total other income (expense) was relatively flat between the periods. Decreased foreign currency losses and increased investment gains were offset by increased interest expense on higher average borrowings and rates.

WAP interest income and expense relates to previous jackpot winner liabilities and accretes at approximately the same rate. WAP interest income also includes earnings on restricted cash and investments held for future winner payments.

INCOME TAX PROVISION (See Note 12)

                                    First Quarter Ended December 31,
                          2012             2011           Favorable (Unfavorable)
Income tax provision   $     32.4       $     28.8       $                    (3.6 )
Effective tax rate           33.2 %           36.4 %                           3.2 pp

Our 2013 effective tax rate on income from continuing operations decreased primarily due to an increase in the tax benefit associated with the manufacturing deduction and the use of a capital loss carryover. Differences between our effective tax rate and the US federal statutory rate of 35% principally result from the geographical distribution of taxable income, differences between the book and tax treatment of certain permanent items, and changes in UTBs.

BUSINESS SEGMENT RESULTS (See Note 15)

NORTH AMERICA SEGMENT RESULTS

                         First Quarter Ended December 31,
                     2012            2011         C h a n g e
Total Revenues     $   409.4       $  322.6     $ 86.8        27 %
Gross Margin              60 %           57 %        3   pp    5 %

Operating Income   $   112.4       $   92.4     $ 20.0        22 %

Quarters ended December 31, 2012 and 2011 compared

North America revenues improved 27% driven by increases in product sales of $55.9 million and interactive of $41.8 million, partially offset by a decline in gaming operations of $10.9 million. Gross margin increased primarily due to lower costs and favorable changes in product mix, including additional contributions from higher margin interactive business. Operating income improved 22% with increased revenues, partially offset by higher operating expenses, primarily due to additions from DoubleDown and an increase of $3.9 million in bad debt provisions related to credit uncertainties on specific customer receivables. Operating margin decreased primarily due to higher operating expenses, which included DoubleDown contingent acquisition related charges of $17.5 million.

NORTH AMERICA GAMING OPERATIONS

                                         First Quarter Ended December 31,
                                     2012           2011          C h a n g e
Revenues                           $   208.6       $ 219.5     $ (10.9 )      -5 %
Gross margin                              62 %          59 %         3   pp    5 %

Installed base (units '000)             43.0          42.6         0.4         1 %
MegaJackpots® (premium brand)           23.4          24.3        (0.9 )      -4 %
Lease (CDS, racino, other)              19.6          18.3         1.3         7 %

Yield (average revenue per unit)       53.06         57.75       (4.69 )      -8 %

Quarters ended December 31, 2012 and 2011 compared

North America gaming operations revenues decreased 5%, primarily due to lower yield in Megajackpots® partially offset by higher yield and installed base growth in lease operations. Gross margin improvement was primarily due to lower jackpot expense and depreciation, as well as an increased mix of lower yield, but higher margin lease operations games. Installed base grew 400 units due to additions in lease operations, partially offset by decreased MegaJackpots® units. Yield decreased 9% primarily due to lower performance in MegaJackpots® and an increasing mix of lower-yield lease units.

NORTH AMERICA PRODUCT SALES

                                            First Quarter Ended December 31,
                                        2012           2011          C h a n g e
Revenues                              $   158.9       $ 103.0     $ 55.9         54 %
Machines                                  101.8          59.1       42.7         72 %
Non-machine (systems, parts, other)        57.1          43.9       13.2         30 %

Gross margin                                 56 %          53 %        3   pp     6 %

Machine units recognized ('000)             7.2           3.8        3.4         89 %

Machine ASP ('000)                    $    14.1       $  15.8     $ (1.7 )      -11 %

Machine units shipped ('000)                6.8           3.5        3.3         94 %
New/expansion                               1.7           0.7        1.0        143 %
Replacement                                 5.1           2.8        2.3         82 %

Quarters ended December 31, 2012 and 2011 compared

Revenues from North America product sales grew 54% driven primarily by increased video lottery machine sales. Machine units recognized increased 89%, primarily due to 1,100 new VLT units in Illinois and 1,600 VLT replacement units in Canada. Non-machine revenues also increased 30%, primarily due to an increase of $10.4 million in IP license fees, in part due to a patent royalty settlement of $5.0 million. Gross margin increased primarily due to the increased mix of higher-margin non-machine sales, primarily IP license fees and conversion parts. Machine ASP decreased 11% primarily due to the increased mix of lower-priced VLT machines.

NORTH AMERICA INTERACTIVE

                                        First Quarter Ended December 31,
                                     2012           2011         C h a n g e
Revenues                          $     41.9       $   0.1     $ 41.8         *
Social gaming                           41.3             -       41.3         *
IGTi                                     0.6           0.1        0.5       500 %

Gross margin                              60 %           *          *         *

DoubleDown statistics
Daily active users/(DAU) ('000)        1,462           n/a
Monthly active users/MAU ('000)        4,931           n/a
Bookings per DAU (0.00)           $     0.31           n/a

Quarters ended December 31, 2012 and 2011 compared

North America interactive revenues grew $41.8 million primarily as a result of our acquisition of the DoubleDown Casino® in late January 2012. DoubleDown's social gaming revenues grew 15% over the 2012 fourth quarter, resulting from increases in both average DAU (up 3%) and bookings per DAU (up 11%). These improvements were driven primarily by IGT content and mobile platform introductions for the DoubleDown Casino® and the integration with IGT rgs® enabling efficient new game delivery. IGTi real-money wagering revenues . . .