Embattled Sega sees software as its savior

Sega was hit by a $663.7 million extraordinary loss including charges to scrap its Dreamcast game machine inventories

In this story: Battered results Return to profit RELATED STORIES, SITES

By Staff and wire reports

TOKYO, Japan -- Sega reported a record net loss in the past year, hit by a hefty charge from pulling the plug on its loss-making Dreamcast game console.

But the struggling game maker sees a return to profit in the business year to next March, as it morphs into a video game software developer.

A return to profitability, fueled by the software demand for the soon-to-launch Microsoft Xbox and Nintendo GameCube game machines, would mark Sega's first time in the black in five years.

Battered results

"We booked the whole cost of scrapping Dreamcast in 2000-01. No additional charges related to that are expected for the current business year," Sega executive officer Shunichi Nakamura told reporters.

Group net loss for the year that ended on March 31 ballooned to $421.9 million, against a $351.3 million loss a year earlier, with a 28 percent sales decline to $2 billion.

The red ink reflected an increased operating loss to $426 million on home video game sales and a $663.7 million extraordinary loss including charges to scrap Dreamcast inventories on top of appraisal losses for its shareholdings.

The game company also posted a $639 million special profit from a gift received from its former president Isao Okawa, who died of heart failure in March.

But that wasn't enough to offset the huge loss.

The result came as little surprise to the stock market since the game maker issued a loss warning in January, projecting a $477.6 million net loss on sales of $2.1 billion.

Return to profit

For the year to next March, Sega forecast it would get back into the black with a net profit of $17.2 million on sales of $1.5 billion.

It plans to release eight game titles for Sony's PlayStation 2, 11 for Microsoft's Xbox, and seven for Nintendo's GameCube, in addition to 30 new games for the Dreamcast.

Shares in Sega were lower on Wednesday, down 90 yen to 2725 yen, compared with a 0.5 percent gain in the benchmark Nikkei average at midday. Sega's results announcement came after trading closed on Tuesday.

Sega's shares have quadrupled since hitting a record low of 690 yen last October, as investors welcomed its decision to cut loose the 128-bit Dreamcast.

Analysts said most of the positive news had been factored into the stock price, but it may have more potential to rise late this year depending on sales of software for PlayStation 2 and other consoles.

Reuters contributed to this report.

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Sega.com

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