Sega eyes growth outside Japan


Sega COO Tetsu Kayama says Sega are looking to purchase overseas developers

By Ravi Hiranand
CNN Hong Kong

TOKYO, Japan (CNN) -- Sega Corp. plans to purchase European and U.S. videogame developers to expand their studios outside Japan, the company said this week.

Sega has declined to name any potential targets. But there is speculation it is set to purchase French company Infogrames Entertainment, owner of the rights to the Atari name.

That sent shares in the French software-publishing giant soaring on Tuesday.

When contacted by CNN, a spokesman for Sega in Japan played down the rumors, noting that the company has long intended to expand in publishing. It got out of the hardware business 18 months ago.

Strategy details emerge

Chief Operating Officer Tetsu Kayama said Sega was set to announce a deal with an unnamed software publisher at the annual E3 video game show in May.

Those talks fell through. But Sega's expansion plans are still moving ahead.

"If a studio has something that Sega doesn't have, then we'll do an acquisition," Kayama told the Wall Street Journal this week.

Sega's spokesman said its expansion strategy is long-term, with little happening in the immediate future.

One industry watcher isn't so sure.

"I'm sure we'll get some surprises in the coming months," said John Davison, editorial director of ZD Media's Game Group.

"Sega would be very smart to start acquiring studios to expand its business," Davison added.

Small public publishers the target

Charles Bellfield, vice president of marketing at Sega of America, said Wednesday that the most "interesting opportunities" for takeovers lie among smaller, publicly traded publishers.

They could give Sega access to development teams and popular game franchises, he told Reuters.

He refused to comment on specific targets. Besides Infogrames in Europe, small U.S. game publishers such as Midway Games are public in the United States.

Bellfield said the only company Sega definitely won't acquire is the world's biggest publisher, Electronic Arts, which has a market capitalization of $8 billion.

Skeptical about Infogrames deal

Despite the jump in the company's stock price, industry analysts told CNN they are skeptical Sega will buy Infogrames.

"It just seems the wrong fit," said Davison. "Out of the Infogrames pie, what would they benefit from? The Atari brand, Reflections and some distribution muscle in Europe for sure, but I'd be surprised if they went for a buyout of the whole company."

Last year, Sega pulled out of the videogame hardware industry and decided to focus on making software for the other major manufacturers.

In addition to their ten Japanese studios, Sega already has one U.S. studio. Visual Concepts, a Californian developer, specializes in sports titles for the American market.

Sega stock closed down 0.90 percent at 2,765 yen, on a day the tech-influenced Nikkei fell 2.48 percent.