The beginning of the end for Sega?
11-07-02 | 03:16 PM
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From: NYC...no longer! Collegeville, PA
The beginning of the end for Sega?
Saw this on Yahoo! Finance:
Does anyone think this spells the end of Sega? I see MSFT execs flying over the carcass like vultures...
Jeremy
UPDATE 4-Sega slashes profit estimate on weak software sales
Thursday November 7, 5:39 am ET
By Yuka Obayashi
(Adds COO comments in paragraphs 17-20)
TOKYO, Nov 7 (Reuters) - Japanese game maker Sega Corp (Tokyo:7964.T - News) slashed its full-year net profit estimate by 72 percent on Thursday on slack software sales, casting a shadow over its plan to become the world's leading game software publisher.
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Sega, which ditched its loss-making Dreamcast game console operations last year, forecast its group net profit for the year to next March at five billion yen ($41.11 million), cutting its May estimate of 18 billion yen.
The revised figure, although better than the loss of 17.83 billion yen scored a year ago, sent its shares down by their daily limit of 300 yen to close at a 22-month low of 1,212 yen.
Sega, creator of the "Sonic the Hedgehog" game, said the revision was due largely to poor U.S. sales of "Sega Sports NFL 2K3", an American football simulation game released in August.
It also blamed the delay and cancellation of some game titles originally expected to be launched by the end of March.
"We miscalculated financial targets for this year because of over-confidence stemming from results last year and a lack of experience as a third-party software publisher," Sega president Hideki Sato told a news conference.
He admitted "a total defeat" to its U.S. rival Electronic Arts Inc (EA) (NasdaqNM:ERTS - News), whose American football game "Madden NFL 2003" sold more than three million units during a similar period.
Sega now estimates first-half software sales at 4.57 million units worldwide, including 2.56 million in the United States.
That falls short of its initial global sales target of 6.2 million units, of which 3.6 million were expected to be shifted in the United States, the world's biggest game market.
For the full year, the gamemaker trimmed its global software sales goal from 20 million units to 12.6 million, which would be a 14 percent decline from the previous year.
"As a result, our consumer business will have an operating loss of 5.4 billion yen this year, instead of our original goal of nine billion yen in profit," Shoichi Yamazaki of Sega's business planning office told reporters.
Sega's consolidated operating profit is now expected to be 10 million yen, down from its earlier forecast of 21 billion yen.
LOSING INVESTOR TRUST?
The profit warning comes as Sega's top shareholder, information services group CSK Corp (Tokyo:9737.T - News), also slashed its earnings target. CSK owns 22.7 percent of Sega.
Partly blaming Sega's performance, CSK cut its group net profit estimate for the first half by 66.7 percent to one billion yen. That compares with a loss of 4.98 billion yen in the same period last year.
Sega, which also makes arcade machines and operates game entertainment facilities, said its first-half net profit was likely to be one billion yen, down 77.8 percent from its earlier estimate and against a loss of 20.87 billion yen a year ago.
The disappointing performance of its key sports game in the U.S. market -- 300,000 units sold compared with the firm's initial goal of 1.6 million -- had already helped push Sega's share price down by more than half from its 2002 peak of 3,300 yen marked in late May.
To calm investor concerns about Sega's growth outlook, Chief Operating Officer Tetsu Kayama said the company was committed to shoring up profits by trimming the number of game development projects and cutting promotion spending.
"We have challenged EA directly. But even with $17.5 million spent on promoting the (football simulation) game, we completely lost," he said, adding that Sega had underestimated the brand power of Electronic Arts.
"Now we will tighten our grip to improve the quality of games and to save on development and sales costs," Kayama told a meeting of analysts.
"Our goal to become the world's leading game software publisher remains unchanged."
Some investors, in fact, see the stock as a bargain.
"I'm disappointed. Sega got whipped by EA," said Takehiko Takachio, senior portfolio manager at Kokusai Asset Management, which oversees 2.16 trillion yen of investment trusts.
"But the stock seems to have factored in this downward revision. At about 1,200 yen I would say it is a bit oversold from a valuation perspective in comparison to its peers.
"For the long term, this may not be a bad time to buy," Takachio said. ($1=121.63 yen) (Additional reporting by Nathan Layne)
Thursday November 7, 5:39 am ET
By Yuka Obayashi
(Adds COO comments in paragraphs 17-20)
TOKYO, Nov 7 (Reuters) - Japanese game maker Sega Corp (Tokyo:7964.T - News) slashed its full-year net profit estimate by 72 percent on Thursday on slack software sales, casting a shadow over its plan to become the world's leading game software publisher.
ADVERTISEMENT
Sega, which ditched its loss-making Dreamcast game console operations last year, forecast its group net profit for the year to next March at five billion yen ($41.11 million), cutting its May estimate of 18 billion yen.
The revised figure, although better than the loss of 17.83 billion yen scored a year ago, sent its shares down by their daily limit of 300 yen to close at a 22-month low of 1,212 yen.
Sega, creator of the "Sonic the Hedgehog" game, said the revision was due largely to poor U.S. sales of "Sega Sports NFL 2K3", an American football simulation game released in August.
It also blamed the delay and cancellation of some game titles originally expected to be launched by the end of March.
"We miscalculated financial targets for this year because of over-confidence stemming from results last year and a lack of experience as a third-party software publisher," Sega president Hideki Sato told a news conference.
He admitted "a total defeat" to its U.S. rival Electronic Arts Inc (EA) (NasdaqNM:ERTS - News), whose American football game "Madden NFL 2003" sold more than three million units during a similar period.
Sega now estimates first-half software sales at 4.57 million units worldwide, including 2.56 million in the United States.
That falls short of its initial global sales target of 6.2 million units, of which 3.6 million were expected to be shifted in the United States, the world's biggest game market.
For the full year, the gamemaker trimmed its global software sales goal from 20 million units to 12.6 million, which would be a 14 percent decline from the previous year.
"As a result, our consumer business will have an operating loss of 5.4 billion yen this year, instead of our original goal of nine billion yen in profit," Shoichi Yamazaki of Sega's business planning office told reporters.
Sega's consolidated operating profit is now expected to be 10 million yen, down from its earlier forecast of 21 billion yen.
LOSING INVESTOR TRUST?
The profit warning comes as Sega's top shareholder, information services group CSK Corp (Tokyo:9737.T - News), also slashed its earnings target. CSK owns 22.7 percent of Sega.
Partly blaming Sega's performance, CSK cut its group net profit estimate for the first half by 66.7 percent to one billion yen. That compares with a loss of 4.98 billion yen in the same period last year.
Sega, which also makes arcade machines and operates game entertainment facilities, said its first-half net profit was likely to be one billion yen, down 77.8 percent from its earlier estimate and against a loss of 20.87 billion yen a year ago.
The disappointing performance of its key sports game in the U.S. market -- 300,000 units sold compared with the firm's initial goal of 1.6 million -- had already helped push Sega's share price down by more than half from its 2002 peak of 3,300 yen marked in late May.
To calm investor concerns about Sega's growth outlook, Chief Operating Officer Tetsu Kayama said the company was committed to shoring up profits by trimming the number of game development projects and cutting promotion spending.
"We have challenged EA directly. But even with $17.5 million spent on promoting the (football simulation) game, we completely lost," he said, adding that Sega had underestimated the brand power of Electronic Arts.
"Now we will tighten our grip to improve the quality of games and to save on development and sales costs," Kayama told a meeting of analysts.
"Our goal to become the world's leading game software publisher remains unchanged."
Some investors, in fact, see the stock as a bargain.
"I'm disappointed. Sega got whipped by EA," said Takehiko Takachio, senior portfolio manager at Kokusai Asset Management, which oversees 2.16 trillion yen of investment trusts.
"But the stock seems to have factored in this downward revision. At about 1,200 yen I would say it is a bit oversold from a valuation perspective in comparison to its peers.
"For the long term, this may not be a bad time to buy," Takachio said. ($1=121.63 yen) (Additional reporting by Nathan Layne)
Jeremy
11-07-02 | 03:48 PM
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DVD Talk Godfather
Crap. And I liked both their basketball and football franchises better than EAs too. It was really saddening for me to see NFL 2K3 get beaten so badly by Madden 2003, when both were excellent games.
It doesn't look like Shinobi is going to save them. Hopefully this pack-in deal with Microsoft helps them get back on their feet, though I would hate to see them indebted to Xbox...
It doesn't look like Shinobi is going to save them. Hopefully this pack-in deal with Microsoft helps them get back on their feet, though I would hate to see them indebted to Xbox...
11-07-02 | 03:48 PM
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From: Austin, TX
I doubt this signals the end for SEGA. They are just experiencing the "growing pains" of going platform agnostic. MSoft could be eyeing this as an opportunity especially since they just included 2 Sega games in their new bundle. I don't think Sega has done a good job of leveraging it's older franchises (Outrun, Afterburner, Space Harriers, etc)
11-07-02 | 03:57 PM
#4
DVD Talk Legend
I think putting so many games on Xbox is part of their problems. None of their Xbox exclusives sold well at all. They may have received money from MS for those exclusives, but they may have been better off going with the PS2 and its much, much larger user base especially in Japan.
Niche titles like Toe Jam and Earl and Jet Set Radio are not going to have a big following so you are best off putting them on a console with 40 million users.
Getting killed in the Sports battle was surely the biggest blow though. No telling how much money went into developing that game and getting the ESPN license, plus advertising only to get murdered by Madden.
Anyone know how NBA 2K3 did?
Niche titles like Toe Jam and Earl and Jet Set Radio are not going to have a big following so you are best off putting them on a console with 40 million users.
Getting killed in the Sports battle was surely the biggest blow though. No telling how much money went into developing that game and getting the ESPN license, plus advertising only to get murdered by Madden.
Anyone know how NBA 2K3 did?
11-07-02 | 04:28 PM
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It seems platform agnostic has failed for them.
Sega has a hardcore group of fans and they spread out all of their software pretty thin making it difficult to support them. I wish that they would ally themselves with one console and maybe go multi-platform for sports or the really big games.
Sega has a hardcore group of fans and they spread out all of their software pretty thin making it difficult to support them. I wish that they would ally themselves with one console and maybe go multi-platform for sports or the really big games.
11-07-02 | 05:04 PM
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DVD Talk Godfather
That is true.
I loved my Dreamcast, and my wife got me a PS2 when it first came out, but I vowed not to get into the console battle again until the dust settled. So I just have a PS2 (no GCN, no Xbox).
I would have definitely bought a number of Sega games had they not been exclusive to other systems. Jet Set Radio comes to mind. In fact, had NFL 2K3 not come out on PS2, I would have bought Madden instead. Even NBA Live is better than before.
Maybe it's because they have to divide up their staff to make exclusive games for different systems? Or because they don't know all the tricks of the hardware, like they did when they were making the hardware, their games are coming back to the pack?
I loved my Dreamcast, and my wife got me a PS2 when it first came out, but I vowed not to get into the console battle again until the dust settled. So I just have a PS2 (no GCN, no Xbox).
I would have definitely bought a number of Sega games had they not been exclusive to other systems. Jet Set Radio comes to mind. In fact, had NFL 2K3 not come out on PS2, I would have bought Madden instead. Even NBA Live is better than before.
Maybe it's because they have to divide up their staff to make exclusive games for different systems? Or because they don't know all the tricks of the hardware, like they did when they were making the hardware, their games are coming back to the pack?
11-07-02 | 05:49 PM
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From: NYC...no longer! Collegeville, PA
It was weird how Sega spread out their releases across multiple platforms. It seemed there was no rhyme or reason for how they did it.
Remember also Microsoft did acknowledge they once looked into purchasing Sega, probably pre-Dreamcast. So this would make it much more of a possibility, especially if CSK wants to get rid of a loss.
It would give Microsoft a foothold in the Japanese development community. And since Microsoft's first-party sports games are lagging, making the 2K series as an XBOX exclusive would be an asset. Perhaps 2K would come out for the PC as well???
After I read the news Microsoft was looking to buy Sega, and then with this Sega-exclusive pack-in deal, I started to get suspicious. I mean, why not pack in some of Microsoft's first-party games? To team up with a third-party, that's suspicious. And I'm sure it didn't help their relations with other console manufacturers either.
I think it will definitely happen, by this time next year, where Sega will be part of Microsoft. Hmmm...will that mean Agetech as well (since CSK owns Agetech) ?
Jeremy
- Toe Jam & Earl - XBOX
- Shinobi - PS2
- VF4 - PS2
- Sega GT - XBOX
- Sonic - GC
- House of the Dead - XBOX
- Gunvalkyrie - XBOX
- Shenmue II - XBOX
- Rez - PS2
- Crazy Taxi 3 - XBOX
- Beach Spikers - GC
- Gungrave - PS2
- NBA2K Series - ALL
- NCAA Football Series - ALL
- NCAA College Basketball Series - ALL
- NFL2K Series - ALL
- NHL2K Series - ALL
- Phantasy Star Online - GC
- Panzer Dragoon Orta - XBOX
- Sega Bass Fishing Duel - PS2
- Sega Soccer Slam - ALL
- Skies of Arcadia - GC
- Super Monkey Ball Series - GC
- WSB2K Series - ALL
Remember also Microsoft did acknowledge they once looked into purchasing Sega, probably pre-Dreamcast. So this would make it much more of a possibility, especially if CSK wants to get rid of a loss.
It would give Microsoft a foothold in the Japanese development community. And since Microsoft's first-party sports games are lagging, making the 2K series as an XBOX exclusive would be an asset. Perhaps 2K would come out for the PC as well???
After I read the news Microsoft was looking to buy Sega, and then with this Sega-exclusive pack-in deal, I started to get suspicious. I mean, why not pack in some of Microsoft's first-party games? To team up with a third-party, that's suspicious. And I'm sure it didn't help their relations with other console manufacturers either.
I think it will definitely happen, by this time next year, where Sega will be part of Microsoft. Hmmm...will that mean Agetech as well (since CSK owns Agetech) ?
Jeremy
11-07-02 | 06:00 PM
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Xbox?
Originally posted by darkside
Putting so many games on Xbox is part of their problems. They may have received money from MS for those exclusives, but hey may have been better off going with the PS2
Putting so many games on Xbox is part of their problems. They may have received money from MS for those exclusives, but hey may have been better off going with the PS2
Why blame Xbox?
If that's the case than let's all blame PS2 for the problems that CAPCOM is having. How about that?
When the Dreamcast Console ended many of it's many fans went different ways PS2, Xbox, GC and some fans didn't even bought a new system. Now we have 3 competitive consoles with Sega fans in all of them which makes Sega sales spread throughout all the 3 consoles.
Do you think that moving all the Sega games to PS2 is going to make it all better?
11-07-02 | 06:30 PM
#9
DVD Talk Legend
Re: Xbox?
Originally posted by kar10
You are no doubt a PS2 lover!!!!
You are no doubt a PS2 lover!!!!
Why blame Xbox?
If that's the case than let's all blame PS2 for the problems that CAPCOM is having. How about that?
If that's the case than let's all blame PS2 for the problems that CAPCOM is having. How about that?
Do you think that moving all the Sega games to PS2 is going to make it all better?
I think Panzer Dragoon will be fine on the Xbox. One, it really needs the power of the Xbox and two its looking to be a top notch game and those usually sell well no matter what. Its more of an action type shooter as well and I think it will find a very large audience on the Xbox. The sports titles should be on Xbox and Sega GT 2002 was a very good choice for the Xbox. Some games like Gunvalkrye and Crazy Taxi 3 probably wouldn't have made a difference either way, but I don't think it would have hurt to make Crazy Taxi 3 a multiconsole game.
I'm not saying don't support Xbox, but Sega makes a lot of quirky titles and the PS2 is probably the best console for stuff like that, because it has 40 million people to sell a offbeat game to.
Last edited by darkside; 11-07-02 at 06:32 PM.
11-08-02 | 01:01 AM
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I just hope they make a great 2k4. This year is the first year ever that I bought more than 1 football game.
I love Madden.
I love 2k3. Much better than Madden in many ways.
We need them around, I agree thought that they should be making better use of some of their classic games. I would love to see updates of some of the old Sega classics.
PowerDrift
OutRun
Space Harrier
I love Madden.
I love 2k3. Much better than Madden in many ways.
We need them around, I agree thought that they should be making better use of some of their classic games. I would love to see updates of some of the old Sega classics.
PowerDrift
OutRun
Space Harrier
11-08-02 | 02:57 AM
#11
Senior Member
Originally posted by Ginsu
I just hope they make a great 2k4. This year is the first year ever that I bought more than 1 football game.
I love Madden.
I love 2k3. Much better than Madden in many ways.
We need them around, I agree thought that they should be making better use of some of their classic games. I would love to see updates of some of the old Sega classics.
PowerDrift
OutRun
Space Harrier
I just hope they make a great 2k4. This year is the first year ever that I bought more than 1 football game.
I love Madden.
I love 2k3. Much better than Madden in many ways.
We need them around, I agree thought that they should be making better use of some of their classic games. I would love to see updates of some of the old Sega classics.
PowerDrift
OutRun
Space Harrier
11-08-02 | 09:45 AM
#12
Retired
I don't think that it's going third party, or making several X-box exclusives that's hurt them, it's just that they haven't been putting out games with mass market appeal. NFL2K3 is great, but didn't sell well compared to madden. We'll have to wait and see on NBA2K3, it should out sell live I'd think. Sonic Adventure 2 sold very well. The Monkey Ball games sold ok. And most of their other games were niche market titles that sold fairly poorly like Jet Set Future, and I"m guessing Shenmue 2. Sega GT didn't catch on. Toe Jam and Earl got mediocre reviews.
They need to put out some big it games. A sonic thats truer to the old games, hopefully Panzer Dragoon Orta will be a hit (though being on the X-box reduces sales compared to having a PS2 version), Shinobi had potential, but has gotten mediocre reviews.
Basically in the old days, Sega was the best of both worlds. They had the quirky niche market games and the mass market games that appealed to lots of people and sold millions. This generation they're lacking in the latter.
They need to put out some big it games. A sonic thats truer to the old games, hopefully Panzer Dragoon Orta will be a hit (though being on the X-box reduces sales compared to having a PS2 version), Shinobi had potential, but has gotten mediocre reviews.
Basically in the old days, Sega was the best of both worlds. They had the quirky niche market games and the mass market games that appealed to lots of people and sold millions. This generation they're lacking in the latter.
It sure helped GC in Feb. when NO good games were around.
11-08-02 | 05:01 PM
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Im sure next year when WS Baseball is released to all platforms, that will help also. That game kicks butt, but I refuse to buy an XBOX for one game. Anyone know how much money Sony paid Rockstar to get GTA series PS2 only?
11-08-02 | 07:26 PM
#16
DVD Talk Legend
Originally posted by GratefulDave
Im sure next year when WS Baseball is released to all platforms, that will help also. That game kicks butt, but I refuse to buy an XBOX for one game. Anyone know how much money Sony paid Rockstar to get GTA series PS2 only?
Im sure next year when WS Baseball is released to all platforms, that will help also. That game kicks butt, but I refuse to buy an XBOX for one game. Anyone know how much money Sony paid Rockstar to get GTA series PS2 only?
Why pay them? I think the sales figues alone would get them to stay onboard. They have made a ton of money so why piss in the pool that is making you rich
