International Game Technology (NYSE: IGT) had a dubious title for a press release. It was named “IGT Re-Aligns to Position for Long-Term Earnings Growth.” The company should ask its employees, or at least 7% of them, how they think this represents growth.
While this talks about long-term earnings growth, IGT lowered its guidance. For its fiscal year 2014, IGT lowered earnings per share from continuing operations down to $1.00 to $1.10 from $1.28 to $1.38 per share. IGT’s second quarter operational earnings per share was put at $0.17 to $0.19. Thomson Reuters has estimates of $1.20 per share for 2014 and $0.29 per share for the quarter.
IGT said that the company is taking actions to re-align its cost structure for long-term earnings growth. The company’s release said,
“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.”
Yahoo! Finance shows that IGT has some 5,000 employees, so this means that 350 workers are being sent pink slips. If the company plans to save $50 million per year based upon 350 layoffs and associated consolidation savings, then that translates to savings of almost $143,000 per person per year.
IGT management addressed a sharp decline in North American gross gaming revenues, further degradation in the international currencies, compliance costs, and the importation environment in the rationale behind the lower earnings guidance and reason for the workforce cuts. At least the company did not acknowledge that gamblers have started to realize that statistically the house always wins.
IGT shares closed up 0.3% at $14.85 against a 52-week trading range of $13.91 to $21.20, and shares were down another 7% at $13.75 in the after-hours session’s reaction to the news.