What do you get when you combine diminished expectations with soft financial results?

If you're an investor in International Game Technology (NYSE: IGT), you get a booming stock price, up 13% Thursday on nearly double the average daily volume. The reason: IGT's earnings per share of $0.22 for the March-June quarter beat the Wall Street consensus forecast by $0.04.

Once you stop applauding -- the stock was easing back a bit on Friday -- check the numbers for the large slot-machine developer. The consensus earnings forecast for IGT's third quarter was the lowest quarterly prediction in more than six years.

Those third-quarter results were worse than the year-ago quarter, as net income fell to $66.3 million from $108.3 million, while revenue dropped 23% to $522.1 million.

And when the CEO uses a phrase like "an environment of suppressed demand," you might ask: "What's all the cheering about?"

Making changes
Some cheering is because of IGT's stock nearly tripling since hitting an intraday low of $6.81 on March 9. If you've held the stock for a year, you're still in the red.

Some cheering is because of IGT's trying to strengthen its financial foundation. In recent months, IGT has completed a popular issuance of convertible notes and amended a $1.7 billion credit facility.

And some cheering is because of IGT reducing operating expenses and conducting a cost-cutting campaign, which includes reducing payroll and improving manufacturing efficiency. Continued...