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Sega on Schedule for Recovery
Sega announced today it aimed to become the No. 1 game software maker in the world, on the back of its future lineup of titles for leading consoles and improved position in arcade sales.
Chief Operating Officer Tetsu Kayama said in an interview that Sega aimed to raise its share of the U.S. and Japanese markets to 15 percent in the 2003/04 business year, from around 5 percent now. The company is also targeting a 12 percent share of the European market, up from 3 percent.
"Our goal is to become the world's largest game software provider," Kayama said.
Sega, known for its "Sonic The Hedgehog" game character, aims to sell 35 million units of game software globally in 2003/04--15 million in the United States, 10 million in Japan and 10 million in Europe. Sega abandoned production of its Dreamcast console earlier this year and shifted focus to its healthier software business, developing games for other platforms such as Sony PlayStation 2 and Nintendo's Game Boy Advance.
Kayama said the company's April-September earnings are on track to meet its forecast. In May, Sega forecast an operating profit of nearly $2.5 million for April-September, against a loss of $233 million for the same period last year.
"It's not only amusement equipment sales, our overall business has been solid so far this business year," Kayama said. He declined to give specific figures. Kayama also said Sega's restructuring plan, mapped out in April, was progressing smoothly.
Under the plan, Sega aims to return to profit in the 2001/02 business year and to raise return on equity to more than 15 percent in 2003/04. Shares in Sega closed up 0.75 percent on Friday, outperforming the key Nikkei average, which fell 1.25 percent. Its shares have risen nearly 20 percent since January 31, when Sega announced it would stop making the Dreamcast console.
Goldman Sachs last week raised its rating on Sega to "market outperformer" from "market performer." It said that Sega's current business was operating above expectations, partly due to upbeat sales of its arcade game machines boosted by "Virtua Fighter 4," the latest version of the long-running hit game.
Multiplatform Strategy
The global game-console market is bracing for a major battle with the arrival of Nintendo's GameCube next Friday in Japan and the November debut of Microsoft's Xbox system in the United States.
Kayama said sales of the new generation of game consoles were likely to peak at around 23 million units in Japan. "Given the momentum of the front-runner PlayStation 2, with its shipment already topping 6 million in Japan, Sony is likely to take a majority share here in the console war," Kayama said.
Sega, which has already released one title for the handheld Game Boy Advance, is set to launch a title for GameCube on the day the new console hits the shelves.
"The largest number of our development projects are for PlayStation 2, but we will offer games for other machines by carefully choosing suitable lineups for each console to match their core customer bases and needs," Kayama said.
Microsoft hopes its Xbox, which has a built-in hard drive and Internet connection, will have an edge over PlayStation 2, whose users need to buy a hard disk and external modem.
"Given the built-in online capability, we can start developing online games for the Xbox. But it is difficult to do so for PlayStation 2 since we don't know how many PlayStation users will buy accessories to link it to the network," Kayama said.
Sega said earlier this year that it would collaborate with Sony in developing online games. "We are talking closely with Sony on a strategy to boost the number of online users among PlayStation 2 holders. We can't say where we stand on that right now...it's top secret," he said.
SOURCE: Reuters.
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