Management’s justification for abandoning its pure lease model was that it could expedite cash flow by creating a replacement cycle. A continuous release of new shufflers and proprietary table games (PTG) would spur replacement of previously sold products. That model didn’t work out as planned and the company recently communicated to the Street that it would move back to the lease model. However, as illustrated in my 7/31/08 post, “SHFL: LET ME KNOW WHEN THEY STOP SELLING STUFF”, SHFL continues to sell both shufflers and PTGs.
The company’s latest shuffler, i-Deal, was released in the fall of 2007 to replace 1999’s ACE shuffler. Unfortunately, placements thus far have been minimal. As a response, presumably, SHFL notified its customers that it would no longer service the ACE shuffler, thus attempting to force casinos into buying or leasing the i-Deal. This begs at least two questions: Did SHFL hurt customer relations with this stuff job and do casinos really need the i-Deal? Considering the low volume of placements to date the answer to the second question may be no. We did, however, get positive feedback on the i-Deal from one table game manager although his casino had not yet purchased the product.
SHFL has sold a lot of product over the past two years. Despite the talk, the numbers show the company hasn’t fully re-embraced the lease model. Without a pipeline of new PTGs, replacement demand in the entertainment segment looks limited. Thus far, on the utility side, the i-Deal has not been the replacement driver the company expected. That fateful decision over 2 years ago to adopt a partial for-sale model continues to haunt SHFL. The recurring revenues from a pure lease model would’ve smoothed out this new product trough.
The company’s latest shuffler, i-Deal, was released in the fall of 2007 to replace 1999’s ACE shuffler. Unfortunately, placements thus far have been minimal. As a response, presumably, SHFL notified its customers that it would no longer service the ACE shuffler, thus attempting to force casinos into buying or leasing the i-Deal. This begs at least two questions: Did SHFL hurt customer relations with this stuff job and do casinos really need the i-Deal? Considering the low volume of placements to date the answer to the second question may be no. We did, however, get positive feedback on the i-Deal from one table game manager although his casino had not yet purchased the product.
SHFL has sold a lot of product over the past two years. Despite the talk, the numbers show the company hasn’t fully re-embraced the lease model. Without a pipeline of new PTGs, replacement demand in the entertainment segment looks limited. Thus far, on the utility side, the i-Deal has not been the replacement driver the company expected. That fateful decision over 2 years ago to adopt a partial for-sale model continues to haunt SHFL. The recurring revenues from a pure lease model would’ve smoothed out this new product trough.
i-Deal: Replacement savior?
