Sega sets sights on video game software market

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TOKYO, Japan (Reuters) -- Troubled Japanese video game maker Sega said on Wednesday it aims to boost its share of the global market for video game software to 25 percent, shifting its focus to software from loss-making hardware.

Sega Corp., the world's third-largest home video game maker, unveiled last Friday a far-reaching strategy including plans to provide game software for rival makers' consoles.

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It will also license its mainstay Dreamcast game console's design technology to makers of personal computers and cell phones so as to increase compatible PCs and other devices.

"We aim to win the top share of the world market in the near future by increasing the number of platforms which can operate Sega software," newly appointed Strategic Counsel Tetsu Kayama told a news conference, setting a new goal to boost its share to 25 percent from the current 4.2 percent, surpassing industry leader Nintendo Co Ltd.'s current 19.6 percent.

"Our focus on content provision is back in place. Sega aims to become a real game creator."

President Isao Okawa, who is regarded as a prime mover in Sega's revitalisation, disclosed at the meeting that he was diagnosed in July with cancer of the oesophagus, although he subsequently underwent treatment and an examination in September found no remaining traces of the disease.

He added that Sega will speed up the release of attractive software, especially online games, to respond to the now mature videogame industry and the global Internet boom.

Corporate Vice President Shouichi Yamazaki said the company also aims for a 20 billion yen ($183.8 million) group operating profit in the 2001/02 business year that starts next April, compared with an expected 16 billion yen loss this business year.

Last week the company warned investors that it expected a consolidated loss on both a net and recurring basis in the current business year, a fourth straight net loss, knocking down its shares on Monday.

Yamazaki said, however, the company plans to return to the black on the group operating profit basis, by cutting its loss on consumer hardware to 20 billion yen next year from an expected 40 billion yen this business year, while improving profits in its software business as well as arcade game business.

Shares in Sega, renamed from Sega Enterprises Ltd. as of Wednesday, ended trade at 829 yen, up 6.97 percent. The news conference began after the market closed.

To boost profits from software, Sega plans to review its whole software development operations including shifting 30 billion yen investment to its own game creators from third-party game publishers providing games for Dreamcast, said Kayama, who has just been recruited from a software company in which Nintendo has stake.

He said: "We plan to expand our profit by utilizing our attractive and affluent software assets to appropriate devices."

Sega officials declined to say which rival game consoles it plans to provide games for, and ruled out the possibility of releasing new software to other platforms before using its own.

Analysts welcomed the company's decision to shift its focus to content from hardware but cited Okawa's illness as possibly clouding the fate of the troubled company.

Traders said rumors that Okawa was sick had heightened market concerns that it might delay Sega's restructuring.

Yamazaki said Sega's interest-bearing debt has fallen to 87 billion yen by October, compared with 213 billion yen a year ago, mostly due to a 10 billion yen capital injection earlier this year by parent company CSK Corp and Okawa himself.

Okawa, apparently seeking to clear up worries about Sega's financial standing among investors, said: "We have enough cash flow to live without any problem for a couple of years. What worries me rather is how well PlayStation 2 will be sold."

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