While modest stock price gains were witnessed in the majority of global gaming suppliers during the month of November, the Association of Gaming Equipment Manufacturers (AGEM) Index tipped downward as a result of a few manufacturers traded on exchanges outside of the U.S. impacted the composite score. The index of 17 global gaming suppliers declined by 3.45 points, or 3.48%, to 95.75. For more than six months, the index has hovered within a tight range, struggling to return to its 100-plus point levels, which were observed for nearly a year prior to the current slump. Compared to a year ago, the index remains down 8.6%.

The AGEM Index clearly outpaced the broader market measurements to the negative side as the Dow Jones Industrial Average and Standard and Poor's 500 Index decreased by a more modest 1.0 percent and 0.2 percent, respectively, during the month of November. The latest operating results from global gaming suppliers continue to reflect a continuing uncertainty and lower levels of demand for products and services. Suppliers such as International Game Technology (IGT) recently wrote that demand has been "negatively affected by global macroeconomic factors" and Bally Technologies (BYI) continues "operating in a challenging economic environment." These trends will likely continue in the near term.

Selected positive contributors to the index during the month included: Bally Technologies adding 1.06 points to the index, with a stock price increase of 8.56%; and Konami posting a 6.27% gain in its stock valuation, contributing 0.92 points to the index. Selected negative contributors to the index included: Lottomatica with its stock price dropping 21.08%, contributing -3.16 points to the index; and Aristocrat Technologies contributing -2.12 points to the index with a 25.93% decline in its stock price.

Proposals for casinos in new jurisdictions can provide a significant impact for global gaming suppliers but in places where gambling has been existence for many years, lawmakers still play an important role in expanding the presence of casinos. The New Jersey Legislature approved a bill in November permitting smaller casinos to be built in Atlantic City. If signed by the Governor, it will change the current law which requires casino hotels to have a minimum of 500 rooms. A portion of the bill would allow boutique hotels to have no more than 20,000 square feet of gaming with only 200 hotel rooms.

However, what is likely to change the future landscape of gambling may not need land at all. Senator Harry Reid has drafted a bill that would reverse laws previously passed in 2006 effectively banning online wagering. The bill would allow only existing operators of casinos, horse tracks and slot-machine manufacturers to operate online poker websites for the first two years, if passed. Online gambling, even if initially limited to poker, is estimated to be very lucrative as an estimated 10 million US poker players already play at websites located outside the country. However, it may be more difficult to approve the bill if it's not passed during the current legislative session as several leading Republicans have already voiced their opposition to legalize online gambling. With Republicans holding the majority in the house when Congress reconvenes next year, timing and politics will play a significant role. (E-12.09.10)

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