Sega reports $420.1 m loss on exit from video-game business

Tokyo: JAPAN’S Sega Corp reported Tuesday a massive group net loss for the just-ended fiscal year, largely reflecting expenses related to its withdrawal from the loss-making Dreamcast game console business.

For the just-ended fiscal year, Sega’s group net loss came to 51.73 billion yen ($420.1 million), deeper than the year-earlier loss of 42.88 billion yen. Its group sales tumbled 28% on year to 242.91 billion yen.

However, efforts to restructure are expected to bear fruit for the current fiscal term. It expects a group net profit of 2.1 billion yen for the current business year, which, if realized, would break a four-year streak of group net losses.

In the current fiscal year, Sega also said it expects to post a group pretax profit of 5.4 billion yen on group sales of 189 billion yen.

Sega terminated production of the Dreamcast console, leaving a special loss of 81.14 billion yen, including losses associated with the liquidation of a mountain of inventory of Dreamcast game consoles and peripheral products. But Sega said it won’t post any further special losses related to its halt in production of the Dreamcast console.

Of the 2 million Dreamcast console units in its inventory at the end of January when it announced its withdrawal from the business, Sega said only 960,000 units remained in its inventory at the end of March.

“We cleared our Dreamcast inventory faster than expected last fiscal year, and we expect sales of our remaining Dreamcast consoles to proceed smoothly this fiscal year,” said Shoichi Yamazaki, Sega’s finance and accounting officer.

As part of its restructuring efforts, Sega said it will also liquidate or streamline roughly 20 affiliated companies this fiscal year.
“We’re already in the process of doing this, and we don’t foresee any of our firms reporting a loss this fiscal year if everything goes as planned,” said Shunichi Nakamura, executive officer at Sega.

In the year ahead, Sega’s Mr. Yamazaki said, the firm plans to focus management resources on its content and amusement businesses. Sega expects to generate group operating profit of 3.5 billion yen and 6.5 billion yen in the two sectors, respectively, this fiscal year.

“In terms of our content business, we anticipate shipping 12.7 million software games (globally) this fiscal year,” Mr. Yamazaki said, adding that last fiscal year, Sega shipped 9.9 million software games globally.

Sega has said it will sell game titles for Sony Corp.’s Playstation2, Nintendo Co.’s GameCube and Microsoft Corp.’s XBox.
However, the leading game maker’s prospects weren’t totally bright, as it projected a group operating loss of 4.1 billion yen for its network business this fiscal year.

Sega said it expects a deterioration in the Internet service provider industry in Europe and the U.S., which may adversely affect its ISP-related operations this fiscal year.

On a parent-only basis, Sega said it expects to post net profit of 4.8 billion yen and pretax profit of 5.1 billion yen on sales of 95 billion yen this fiscal year.

-- The Wall Street Journal