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Sega Returns to Profitability
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By YURI KAGEYAMA, AP Business Writer
TOKYO - Japanese video-game maker Sega Corp., which has seen talks collapse on two proposed alliances recently, returned to profitability for the fiscal year just ended despite faltering sales.
Sega, which makes the Sonic the Hedgehog games, posted a 3.05 billion yen ($26 million) profit for the year ended March 31, a reversal from the 17.8 billion yen loss racked up a year ago, the Tokyo-based company said Monday.
Sales fell 4 percent to 197 billion yen ($1.7 billion) from 206 billion yen.
The numbers were in line with the revised forecasts Sega gave earlier this month, which were better than its outlook in February. But the results fell far short of the booming revival in video-game sales Sega has promised.
Sega recovered from the costs linked to dropping its Dreamcast (news - web sites) machine as well as for streamlining its operations by getting rid of money-losing subsidiaries to focus on a turnaround as an entertainment company.
Sega acknowledged defeat to Japanese rival Sony Corp (news - web sites).'s PlayStation2 (news - web sites) and gave up making Dreamcast in 2001.
Sega also announced Monday that president Hideki Sato will be replaced next month by Hisao Oguchi, 43, who has overseen game development during his two-decade career at Sega.
Oguchi stressed Sega must become stronger in North America, where the market is still expected to grow this year while stagnating in Japan.
Sega will look into possible alliances with U.S. companies and may set up a design team in the United States, he said.
"The trend in games changes very quickly, but big business opportunities lie there," Oguchi said at a briefing for investors at a Tokyo hotel.
Oguchi has shown talent for creating popular games such as an arcade soccer-and-card game that was a huge hit in Japan last year and has set up a successful bar in Tokyo filled with electronic dart games.
Sega said it plans to break even in fiscal 2003 in the consumer video-game segment by returning to basics, such as beefing up its Sonic series. It lost 8.6 billion yen ($75 million) in that sector in fiscal 2002.
It will also reduce the number of games it makes a year to concentrate on profitable games. Of the 106 games Sega produced in fiscal 2002, half lost money. Of the 77 titles planned for this fiscal year, only about 20 percent will likely lose money, Sega officials said.
Sega sold 10.66 million games in fiscal 2002 and plans to sell 9.25 million games this fiscal year.
Sega predicts its net profits will more than double in the fiscal year through March 2004 to 7.5 billion yen ($65 million) despite a 2 percent drop in sales to 193 billion yen ($1.7 billion).
Earlier this month, Sega said negotiations with Sammy Corp., a "pachinko" pinball-machine maker, had fallen apart. They had announced the talks toward a possible alliance in February.
The same day, Tokyo-based rival Namco, which makes Tekken games, withdrew a merger offer it had made about a month ago to Sega. A Sega-Namco merger would have created the biggest video-game maker in Japan.
Japanese game makers are increasingly opting for partnerships as competition in the industry heats up.
