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IGT closing down Japan operations

11 Feb 2010

By Howard Stutz

LAS VEGAS, Nevada -- Slot machine giant International Game Technology said Thursday it will close its operations in Japan later this year.

In a brief statement, the Reno-based company said the closure would include severance charges of about $20 million. IGT said the decision was made because of "ongoing difficult market conditions and lack of strategic fit."

Japan's slot machine business has been volatile over the past few years. In fiscal year 2007, IGT shipped 29,800 machines to Japan. That figure fell to 6,000 machines in 2008 and 3,775 machines in 2009.

JP Morgan gaming analyst Joe Greff estimated the company would ship just over 2,000 machines this year.

"Given the capital investment required for this business, as well as the minimal earnings impact, we do not see the decision to end operations as a negative aspect of the IGT story," Greff told investors.

Analysts said the Japanese slot machine market has experienced several legislative changes over the past few years, which has made the games less desirable to customers.

"Japan has always been an erratic, hit or miss, low margin market for (IGT), and we believe making the conscious decision to stop trying to be all things to all customers is the right move by new management," Macquarie Securities gaming analyst Joel Simkins said in a research note.

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