Observers unfazed by resignations at Harrah’s

Harrah’s Entertainment rang in the New Year with a trio of high-level executive resignations, possible harbingers of departures to come. On Dec. 28, the Business Press learned that Senior Vice President of Operations Tony Santo and Central Division President Anthony Sanfilippo were leaving the company. Both resignations became effective New Year’s Day. Neither was formally announced by Harrah’s.

On Jan. 3, Harrah’s informed the Securities & Exchange Commission of the resignation of COO Tim Wilmott, effective Jan. 5. Wilmott had been with Harrah’s since 1987.

Company spokesman Alberto Lopez chalked up the nondisclosure of the Santo and Sanfilippo resignations to standard practice. „We wouldn’t announce the departure of a Harrah’s senior executive that’s been with us for quite a while,“ he said. „As a matter of practice in corporate communications in America, it’s just not done. I, in my tenure at Motorola, dealt with the leaving of three chief operating officers and we never announced the leaving of any executive.“

Harrah’s spokesmen did not dispute reports that efficiency experts, variously reported to be Bay Area-based Mackenzie Group and New York-based McKinsey & Co., had been on-site since September. The latter’s Mitch Kent was precluded from confirming or denying McKinsey’s involvement and Mackenzie did not return a call from the Business Press.

According to Gaming Today, Harrah’s was ramping up „a streamlining plan at the corporate level that is expected to trim perhaps several hundred million in administrative expenses.“ A Business Press source stated that as many as 5,000 positions could be trimmed, particularly in construction, marketing and information technology, but not on the gaming floor. „I know of no cuts to those areas,“ Lopez said of the mooted slashing of corporate-level jobs.

Job cuts disputed

Lopez said the allegation of thousands of job cuts was off „by an order of magnitude. We don’t have any targets.“ As for a report that five Total Rewards staffers at corporate headquarters had been pink-slipped on Dec. 1, he said, „I dispute that. You tell me who you’ve spoken to. Right now I am just totally disputing that. Harrah’s will continue to invest in its Total Rewards infrastructure.“

The spokesman did not, however, take issue with the larger premise that job cuts and restructuring were on the way, characterizing it as part of an ongoing reinvention of the company. „Here in Las Vegas, we love to be on the cutting edge of Las Vegas 3.0,“ he said. „So we’re always looking for ways to be more efficient.“

Business as usual

Outsiders shrugged off the Santo and Sanfilippo departures, and the prospect of downsizing at Harrah’s in general. „It’s normal, any acquisition of that type, that some of the senior executives do leave,“ said Los Angeles-based stock analyst Saul Leonard. Nor did he think the resignations would impact Harrah’s stock. „Assuming they get licensed, the stock’ll be at 90, when it’s acquired. The stock is not being traded now for its unknown potential, so I don’t see what effect (the resignations) could have,“ he concluded.

Raving Consulting President Dennis Conrad, a former Harrah’s exec, also saw nothing untoward. Presupposing that changes are coming, he said, „if I were a shareholder, I’d be thrilled. If they weren’t doing something (preparatory to going private), that’d make me nervous.“

As for the prospect of resignations and terminations, „they will handle this with dignity to the people involved,“ Conrad maintained. „I don’t view this as a cold, clinical, corporate surgical strike.“

Projects in Limbo

In Biloxi, where plans for a billion-dollar casino resort where placed on hold last year, Mayor A.J. Holloway says Harrah’s still has big plans. „I certainly hope so,“ he added, noting that „my level of confidence is good. The market’s here. Harrah’s knows that. They’re still buying property today. That’s what their real estate agent told me.“

Motley gaming correspondent Jeff Hwang, in a Dec. 22 dispatch, advised against revival of Harrah’s Biloxi project. Hwang cited the company’s post-buyout debt-to-equity ratio (8.6x) and a difficult competitive position in Biloxi as disincentives.

Holloway cited a new worry: The Choctaw Tribe wants to open a casino in adjacent Jackson County, just off main feeder route I-110. „That has got the concern of all the casinos here,“ Holloway said.

If successful, the Choctaws could interdict drive-in traffic from Florida, Georgia and South Carolina, with an economic impact Holloway described as „devastating“ to Biloxi. The mayor estimates that three-fourths of Biloxi’s drive-in business comes by way of I-110.

Elsewhere, according to Lopez, Harrah’s resort projects in the Bahamas, Slovenia and Spain were going forward as announced. He was more noncommittal about Las Vegas, where Harrah’s has amassed 350 acres on or near the Strip, and has submitted plans for modifications to Paris-Las Vegas and Caesars Palace.