A lot of speculation surrounds a newspaper report alleging Sega is in negotiations with Nintendo for a possible buyout, which saw shares in Sega rise 10.5% today.
The report in
NY Times caused Sega's shares to jump by their 100 yen limit or 10.48 percent to 1,054 yen before the Tokyo Stock Exchange suspended trading about 30 minutes before the market closed.
Nintendo, the world's second largest home video game maker, fell 750 yen or 4.12 percent to close at 17,450 yen as investors dumped shares on concerns that the possible takeover of the loss-making Sega would mean a heavy burden for Nintendo.
In the report, it is said that executives close to the negotiations that the two companies were holding discussions which could lead to Nintendo's acquiring Sega for about $2 billion. They said the terms of the transaction were still being negotiated. Whilst still in negotiation, the deal may not go ahead.
Both companies have strongly dismissed the claims as false. "There is absolutely no chance that Nintendo will buy Sega," Nintendo president Hiroshi Yamauchi said in a statement. Whilst Sega spokeman also said the claims are false.
Sega's chairman, Isao Okawa, has been trying to sell the company for some time, the executives said, and has even held talks with Microsoft, which is itself planning to enter the video game business by next Christmas with a next-generation console called the Xbox.
Analysts doubt the deal will go ahead. As another report mentions, Nintendo already has 700 game creators - it does not need another 900 creators from Sega. Add to this the hefty debt burden and the fact the Nintendo is not looking at the arcade industry in which Sega is the market leader, and many points lead to a non buyout.
Sega has set the standard which other companies have been following (and then passing), and it has again been moving ahead of its competitors in the online stakes offering subscribers free dreamcast consoles if they agree to signup for 18 month term on their Sega.net system. They are also trying to have a dreamcast unit in as many households as possible with internet and camera facilities. Sega is also working with Motorola for games on wireless phones as reported in a
previous story.
History has shown that the lead is quickly overtaken and then maintained by its competitors in the home market stakes. Last year Sega broke records in September and sold 500,000 consoles in USA - this year has seen Playstation II break this record with KMart, USA's second largest retailer, dropping the Dreamcast line from its shelves.
With the publicised move away from hardware and Sega's strong development of software for Nintendo's hand-held Game Boy units, there might be some fire around today's smoke.
