While in Vegas, Deutsche Bank’s Carlo Santarelli dropped in on Boyd Gaming and … well, the news wasn’t as good there as on the Strip. He predicts a “tempered recovery,” adding that “expectations for an inflection in the LV locals gaming recovery are premature at present.” All the important indicators — employment, construction activity, home prices — are trending in the right direction. Not so good for players is a drastic reduction in comps and promotional offers. Given all of that, is it any great surprise that locals are spending 4/5 of what they were at the height of the boom? Boyd, specifically, is looking toward $200 million in locally derived cash flow this year, compared to 2007’s $275 million. According to Santarelli, “they believe [recovery] is lurking around the corner,” as they always seem to do. Elsewhere, its Midwest casinos are stable, performance in Louisiana — where Wall Street erroneously predicted Boyd would over-saturate — is strong while neighboring Mississippi is a weak spot. And, Boyd oh-so-casually just happened to mention that many regional casinos are being shopped around these days. Santarelli, however, sees Boyd as more of a potential seller than a buyer.
International Game Technology: Stiff competition and adverse trends in the market still make IGT an underdog. However, private equity funds — which have dabbled rather 
disastrously in casinos — may be looking to purchase equipment manufacturers now — and IGT would be one of the more attractive acquisitions. Company leadership, in the meantime, is buying loyalty with a mixture of dividends and share repurchases. Potential upsides — wider wide-area progressives and Illinois slot routes — were relegated to the bottom of Santarelli’s report. The company’s energy appears almost completely focused on monetizing its DoubleDown acquisition overseas, drawing upon its deep and impressive repertory of games, in which respect it is certainly playing to its strengths.
Bally Technologies. Having already “priced in” the strength of Bally’s wide-area progressives and systems sales, Santarelli left BYI HQ in a ho-hum mood. Bally’s NASCAR progressive has been seeing action in Connecticut and California, as well as the Las Vegas Strip, but the company needs it and comparable games to grow, to compensate for the expected retirement of 9,000 machines next year. Management is bullish about Internet gambling, believe it can take home 10% of online win, comparable to European levels. Stability and strength seem to be the key impressions Santarelli took home with him, even if Bally didn’t rock his world.
