Sega seeks profits

Will be back in the black this year, company claims

By Tony Smith, 26th April 2001

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Sega will be back in the black this year, the company promised today after four years of losses.

The company said it expects to post a full-year loss of ¥58.3 billion ($477.5 million) on sales of ¥260 billion ($2.13 billion).

Central to Sega's financial turnaround is its shift toward software and away from hardware. Certainly it was last year's desperate attempt to cut Dreamcast prices to boost sales that ultimately led to losing money last financial year, which ended 31 March.

Ditching Dreamcast cost Sega ¥80 billion ($655 million).

Sega's plan going forward is to cut its workforce by 30 per cent - around 300 staff - a move it announced a couple of months back. Interest-inducing debt will be cut by ¥60 billion ($491.4 million) over the next three years. The focus on software should yield margins of over 30 per cent by April 2004 compared to the 1.5 per cent it makes on software today.

The company reckons revenue from software should reach ¥120 billion ($982.8 million) in the financial year to 31 March 2004, up from the ¥62 billion ($507.8 million) it hopes to make in the 12 months to 31 March 2002.

There's no reason why it's predictions should be considered fanciful. Shed of the money pit that was Dreamcast - and the cost of developing and marketing a successor console - Sega can focus on leveraging one of the strongest brands in the games business. As will allying itself with platforms like Nintendo's GameBoy Advance and Microsoft's Xbox. ®