Time will tell if decision to end market speculation was the right move

IGT’s decision to close its operations in Japan later this year marked a sound move, especially in light of difficult market conditions and a limited strategic fit with the slot giant’s core business.

IGT CEO Patti Hart has made it clear that a key goal for the company is to manage costs and focus on operating efficiencies. That has meant some hard decisions in terms of cost-cutting and layoffs, but in the long haul, the company believes it will be leaner, stronger and more focused on its core products.

Analysts have noted that revenue growth has been hit hard by the economic downturn, as recession-weary citizens remain leery of spending on much of anything other than necessities.

In Japan, drawn-out regulatory actions have hurt the Japanese market, negatively affected the Japanese market, hindering the introduction of new products by IGT and making slot machines less desirable to gamblers. Analysts have indicated IGT’s sales in Japan would continue to drop. The company sold 29,800 units in 2007 versus an estimated 3,775 in 2009 – definitely heading in the wrong direction.

Union Gaming analysts noted that IGT originally anticipated that a game regulation change would stimulate accelerated replacement demand for the large pachislot installed base, which had peaked at nearly 2 million units, and that it stood to gain a larger market share. But the ultimate regulation, known as Reg 5, limited game volatility and capped payouts, which hurt slot parlors and caused many to close their doors.

The gamble for IGT is that many of the Reg 5 games will be reaching their mandated lifespan of three years, and could be followed by an amendment allowing greater volatility and ultimately increasing yields and demand, the analysts said.

IGT is no longer willing to speculate on changes in Japan. Only time will ultimately tell whether it’s a good decision or whether IGT should have let it ride.

Softening on Massachusetts slots?

Sentiment in the Massachusetts Legislature may be shifting toward expanded gambling.

In a column published in the Burlington Union, House budget chief Charles Murphy wrote, “While suffering a slow-down like other sectors, our tourism industry is already the envy of the region and continues to help drive our economy. Destination gaming could prove yet another premium attraction to those already drawn to Massachusetts’ unique history, and its many cultural and entertainment offerings.”

He added that “in addition to providing much needed revenue for the state, destination gaming proponents tout the potential for thousands of good-paying, permanent jobs in construction, lodging, transportation, and food service, among other industries.”

A marked reversal from Murphy's March 2008 position to defeat Gov. Deval Patrick's three-casino proposal, it has raised eyebrows among statehouse observers. In one article published in the Dedham Daily Transcript, reporter Jim O'Sullivan wrote that Murphy "appeared to begin laying political cover ... for lawmakers to switch their votes in favor of expanded gambling, signaling his own shift as the Legislature prepares to tackle casino and slot machine legislation."