Sega Corporation reported a $421 million for the fiscal year ending in March, however with its refocusing on the software and arcade business, the company is estimating a net profit of $17 million for 2002.
Sega's group net loss probably widened to about 58 billion yen ($472.9 million), or 356.37 yen a share in the twelve months ended March 31 from 42.9 billion yen, or 390.57 yen, in the same period a year ago, according to the average estimate of four analysts surveyed by Bloomberg News. Sales are expected to fall 23 percent to 260 billion yen. Sega in January forecast a loss of 58.3 billion yen for the year. The creator of Sonic the Hedgehog earlier this year said it would take a charge of 80 billion yen to shutter its Dreamcast operations, bringing to an end the company's 17-year history as a maker of home video-game machines. Since then, Sega has hyped its software-making prowess, securing agreements to design games for Microsoft Corp.'s Xbox game console, Sony Corp.'s PlayStation 2, Nintendo Co.'s GameCube and even Internet-ready mobile phones for Japan's NTT DoCoMo Inc.
"Sega's focal point is now on how many games the company is able to sell for its rivals gaming devices", said Takashi Oya, an analyst with Deutsche Securities Ltd. "In that sense, investors are interested in what kind of games it will release this year."
A loss in the year just ended would mark Sega's fourth in as many years, a period marked by the death of Chairman Isao Okawa and the release of the Dreamcast console to a tepid response in Japan. To recover, Sega's management in April said it would cut debt, costs and the number of workers while devoting resources to developing video games for companies like Microsoft. Sega will report full-year earnings today at about 3 p.m. Tokyo time.
Sega is aiming to reduce debt 65 billion yen by March 2004 and cut the workforce at its parent company to 700 from 1,081 during the current fiscal year to March 2002.
The company is also trying to sell stakes in 27 companies, along with some subsidiaries, welfare facilities for employees and, if necessary, its headquarters building in Tokyo. It will also cut its parent-level sales, general and administration costs by 6 billion yen to 22 billion yen, company executives told analysts last month.
Barring any further setbacks, Sega expects to return to profit this year.
Sega's shares have more than doubled this year, boosted by the company's decision to get out of the hardware business. Sega has outpaced gamemaker Nintendo's 17 percent gain and Sony's 30 percent rise.
Software
Though Sega has a library of more than 1,000 software titles, the decision to become a game designer means the company can no longer rely on a captive audience of game players owning its Dreamcast console. Sega must now stand out among software designers whose budgets have soared to Hollywood proportions as they seek greater realism in their games.
Sega has said it will spend 14.5 billion yen to develop 118 home-use video-game titles this year, aiming at sales of more than 62 billion yen on 12.7 million copies of games. Game titles include ''Shenmue 2'' and ''Sonic Adventure 2,'' a new version of the high-speed three-dimensional action game ''Sonic Adventure.'' Sega will also continue to develop 65 titles for the Dreamcast console, the failed game machine the company released in Japan in November 1998. As of April, Sega said it had stockpiles of some one million Dreamcasts, about half January's levels.
"Sega's business is about how many Dreamcasts it will sell out in the first half to September", said Nubumasa Morimoto, an analyst with Tokyo Mitsubishi Securities Co. "And how many games it will be able to sell in the second half this year", he said.
Sega said last week it will develop at least 10 games for Nintendo's GameCube, the Kyoto-based gamemaker's successor to the Nintendo 64 game console. Titles will include ''Super Monkey Ball,'' an arcade game, and the soccer game ''Virtua Striker 3 Ver.2002.'' The company is also developing ''Phantasy Star Online for GC,'' a network role-playing game originally developed for the Dreamcast and part of the company's emphasis on teaming players through the Internet. For the Xbox, Sega will publish 11 titles. Among the games will be three from its library and ''Gun Valkyrie,'' being developed especially for the Xbox.
Dreamcast
Sega's troubles with Dreamcast began with the machine's debut in Japan when a lack of software titles discouraged gamers from trying out the 128-bit device. Sega tried to remedy that with price cuts and advertising campaigns promoting the modem-equipped console's online capabilities.
The console sold for 29,800 yen at its release in Japan though it now sells for 9,900 yen. Sega lowered the Dreamcast's U.S. price in January to $100 from $150 to get rid of inventory as quickly as possible.
Dreamcast never lived up to its hype as the first of a series of gaming machines with online capabilities, faster processing speeds and the ability to reproduce graphics with a heightened sense of realism.
Sega sold just 2.32 million of the consoles worldwide between Apr. 1 and Dec. 31, 44 percent lower than the company's expectations. Sony has sold more than 10 million of its PlayStation 2 game consoles worldwide since the device's release to Japanese stores on Mar. 4 last year. Sega-made software sales for the April to December period totaled 8.15 million units, 34 percent lower than the company had hoped.
SOURCE:
Bloomberg News.
