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Sega Aims to Return to Profit in 2001/02
During a strategic meeting on Thursday, Sega Corp outlined their plans in the next year to turnaround four straight years of losses, with the project already starting earlier this month.
The goal was part of a restructuring plan intended to transform Sega into a game software developer after it abandoned its loss-making Dreamcast console in February and swallowed an 80 billion yen ($655 million) extraordinary loss in the process.
It also targeted a boost in its return on equity to 15 percent or more in the 2003/04 business year, up from an expected two percent in 2001/02. It will trim its parent-only workforce by 300, or nearly 30 percent, by the end of this business year compared with January levels, while cutting interest-carrying debt by 65 billion yen over the next three years.
"They look like they're on track to earn a profit," Deutsche Securities analyst Takashi Oya said after a briefing for analysts and reporters. "But this time they took only a half-step forward. I'd been expecting a somewhat bigger step, so I'd say this is neutral."
Sega's shares ended down 2.32 percent at 2,525 yen in Tokyo on Thursday, compared with a 1.66 percent rise in the benchmark Nikkei average. The announcement came after the end of trade. The decision to cut loose the 128-bit Dreamcast has been welcomed by investors, however, with Sega's shares more than tripling in value since hitting a record low of 690 yen last October.
The company estimates it will post a record consolidated net loss of 58.3 billion yen in the business year ended on March 31 on sales of 260 billion yen.
In its attempt to recast itself as a game software company, Sega aims to boost its profit margin in its core game content business to 30 percent or more by the year to March 2004, against the current 1.5 percent.
Looking to Double Software Sales
Sega is also targeting a near doubling in annual game software sales to 120 billion yen in 2003/04 from a projected 62 billion yen in 2001/02.
The company, which is set to supply 11 games for Microsoft Corp's Xbox game machine due for launch this autumn, said on Thursday it would also soon be showing games planned for Nintendo Co's Game Cube console, scheduled for roll-out in Japan in September.
Deutsche's Oya was upbeat about Sega's software prospects. "Sega's contents are second probably only to Nintendo," he said. "They're very strong, so of course Nintendo would want them."
He added that, given Sega's tenuous cash position, the company may have no choice but to sell some of the 85 billion yen in shares of Sega, software house CSK Corp, which holds a 24.6 percent stake in Sega, and other CSK affiliates, that were given to Sega by its former chairman and president Isao Okawa only a couple months before he died unexpectedly of heart failure in March.
Yoshiji Fukushima, a CSK executive who replaced Okawa as Sega's chairman, said the company was still considering whether it would need to sell the shares if conditions in the first half of this business year turned out worse than expected.
Sega's restructuring plans also called for selling all or part of its stakes in 27 of the 58 firms in which it holds shares. It also plans to sell or shut down loss-making units.
Arcade Front
Sega plans to increase its arcade business worldwide by progressively introducing a number of new arcade centers. The company expects sales in its arcade business to increase accordingly. Sega's ultimate goal is to increase its own market share in the arcade space. However, the company is not going at it alone. Its recently announced strategic broadband alliance with Namco and Sony Computer Entertainment will drive its plans for arcade expansion forward. Specific details regarding that partnership were not revealed.
SOURCES: Gamespot, Reuters
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