According to company press materials, in order to responsibly address the challenges facing the gaming industry and their related impact on IGT, the company is enacting cost?cutting measures including the reduction of its global workforce by 7 percent to realize expected cost savings of $30 million in the current fiscal year and an estimated $50 million on an annual run?rate basis.
IGT is lowering its fiscal year 2014 guidance for adjusted earnings per share from continuing operations from $1.28 to $1.38 to $1.00 to $1.10. The company is also providing guidance for adjusted earnings per share from continuing operations of $0.17 to $0.19 for the second fiscal quarter of 2014.
"As we reach the halfway point in our fiscal year, you can see this is a challenging time for the industry and IGT,” said Patti Hart, IGT CEO, in a prepared statement. “We knew that our success in 2013 would be difficult to replicate. However, we did not expect such a sharp decline in North American gross gaming revenues, or further degradation in the international currency, compliance and importation environment."
In addition to the actions mentioned above, IGT is taking a number of decisive actions to position for long?term earnings growth, including:
• Continued commitment to improve its gaming operations performance;
• Securing a new global licensing agreement with Sony, providing IGT with expanded franchise rights for Wheel of Fortune through the year 2024;
• Launching Powerbucks, a new interstate progressive jackpot, in Nevada, New Jersey, South Dakota and Canada by the end of the fiscal year;
• Preserving its $200 million annual R&D investment, to maintain industry leading innovation;
• Reaching a new agreement with Action Gaming to solidify IGT's 90?plus percent market share in video poker;
• Re?engineering its game development process to leverage its strength in social gaming to improve land?based game performance; and
• Increasing its commitment to the Asian market.
Industry analysts seemed pleased with IGT’s approach to ongoing business difficulties in the supplier and regional gaming industries.
“We believe the guidance cuts relate to relative weakness in its core business, including gaming operations and product sales,” wrote David Bain, an analyst at Sterne Agee, in a note to investors. “In gaming operations, yields continue to be under pressure from a weak domestic environment and strengthening competition. In addition, its install base may see further declines from customers requesting conversions to sale from lease (especially internationally).
“IGT is cutting $50 million per annum in costs—in essence, right-sizing its business in order to better fit both the current supplier environment and its own position within it,” Bain added.