Investors have rallied around Sega following rumours that it may ditch its console business.

According to a report in the Asian Wall Street Journal, the Japanese video game company will not pull its Dreamcast consoles off the shelves immediately, but is considering a "slow silent retreat with honour".

"I think Sega in the long run is going to get out of the hardware business," said Kazuhiko Nishi, vice chairman of a subsidiary of CSK (a part-owner of Sega), who is also close to Sega president Isao Okawa.

Sega's share price rose ten per cent to 1,112 yen yesterday. Its stock has tumbled 65 per cent this year.

In October, Sega warned investors to expect losses of 22.1 billion yen ($190 million) for the year ending March 31 - its fourth consecutive year in the red,. The company wants to push its technology into areas such as mobile phones. It is also sticking to its plan, announced in November, to concentrate on three business areas: game software, network services, and amusement arcades.

But there is no commitment within the plan to make a next-generation successor to the Dreamcast video machine.

Yesterday the Sankei Shimbun said Sega may supply software for Nintendo's Game Boy Advance handheld game machine. Nintendo denied the report. This followed an article in The New York Times that said Nintendo was in talks to buy Sega - both Japanese companies rubbished the claim, while Microsoft was also rumoured to be have been sniffing around Sega. ®

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