Konami has emerged as a real force in the slot world but CYQ1’s ship share is not sustainable. History says BYI and IGT will regain some share back from Konami in CYQ2.
There’s no question that Konami has been steadily gaining ship share over the last 2 years. The games are popular and the Street is abuzz over the new big “player”. However, we would caution investors who are using Konami’s March quarterly ship share percentage and absolute number of units shipped to extrapolate results for the full year. The March quarter is Konami’s fiscal 4th quarter and has historically been its strongest quarter for unit shipments due to timing of new product releases and corresponding special promotions.
As illustrated in the chart below, Konami’s March quarter is typically followed by a very weak June quarter. In 2008 and 2009, the June quarter saw sequential declines of 49% and 61%, respectively, corresponding to a ship share drop of 7 and 10 percentage points. Therefore, while we expect Konami’s shipments to be up from 1,038 units last year, we are expecting a material sequential drop this year.
We’re projecting that roughly 18k units are shipped in North America in the June quarter, which is a little north of the 17k units we estimated were shipped in the March quarter. If Konami ships 1,200 units less sequentially, that means that 2,200 units are up for grabs for WMS, IGT, BYI and ALL. Therefore, there should be some sequential share gains amongst the other top 4 suppliers. In looking at the chart, it appears that IGT and/or BYI could be the prime sequential beneficiaries of the “Konami phenomenon”.