The GHZ Forum

TOKYO, Feb 8 (Reuters) - Sega Sammy Holdings (6460.T: Quote, Profile, Research) warned on Friday that it expects to lose 26 billion yen ($242 million) this business year amid slow sales of pachinko machines and said it would cut 400 jobs at its game software unit.

Sega Sammy, the holding company for video game software maker Sega Corp and "pachinko" and "pachislot" gambling machine maker Sammy Corp, also slashed its dividend forecast for the year to March by a quarter to 45 yen.

The forecast for a group net loss of 26 billion yen in the year to March marks a sharp reversal from its prior estimate for a profit of 1 billion yen. It cut its sales forecast by 12 percent to 475 billion yen.

Pachinko is a vertical form of pinball while pachislot is a high-tech variation of a slot machine. The two, a form of legal gambling, are part of one of Japan's largest industries with annual revenues of some 30 trillion yen.

The pachinko market has been hit by tighter regulations on the industry, while the outlook for the game arcade market has been dented by the soaring popularity of Nintendo Co Ltd's (7974.OS: Quote, Profile, Research) Wii game console that users play at home.

Sega Sammy predicted its pachinko machine segment would see operating profit fall 85 percent to 11 billion yen, and forecast its arcade division to post a loss of 11.4 billion yen, against a 132 million yen profit in the prior business year.

The net loss forecast reflects the pushing back of planned sales of real estate to the next business year and retirement benefits to the 400 employees being cut at Sega, equivalent to about 5 percent of its group workforce.

Sega Sammy said it plans to close Sega Amusements Singapore Pte Ltd and restructure globally in order to deal with its poor performance of game machines for arcades overseas.

In November, it announced a plan to close or sell 80 of its 430 arcades by March.

Prior to the announcement, shares of Sega Sammy ended at 1,100 yen, down 5.9 percent, reaching its lowest closing price since the company was formed in October 2004 after the merger of Sega and Sammy. The shares underperformed against benchmark Topix 's 1.4 percent fall.

FlashTHD wrote:And what other three-initial company name, friends, nearly died under the same circumstances?

And what's with people not playing at the arcades because of the Wii?

So in other words, any in-house Sonic games are only gong to get worse?

Yami CJMErl wrote:So in other words, any in-house Sonic games are only gong to get worse?

DackAttac wrote:

Yami CJMErl wrote:So in other words, any in-house Sonic games are only gong to get worse?

...Is that really even possible?

G.Silver wrote:I think Sega beat Namco to the fighting bear punch with Fighting Vipers.

P.P.A. wrote:Wasn't it that SEGA planned or merging with Sammy but then pulled back the offer, after which Sammy got pissed and violently forced the merge?

RocketPunch wrote:In spite of what our intellects tell us, our instincts know that this is where it all went wrong.

RocketPunch wrote:In spite of what our intellects tell us, our instincts know that this is where it all went wrong.

Isuka wrote:Whether they are actually right or not, I just can't get over how unprofessional Kotaku is.

Isuka wrote:I believe that the next slew of first-party Sonic titles will be much the same as the last ones, but there'll be Burger King and Coke billboards all over the place.
That's the optimist in me speaking.

Back in October, it was becoming clear that all was not entirely well within the franchise of Sega Sammy. The company, which makes the majority of its money from pachinko machines, downsized its profit and net sales forecasts for the financial year.

Although the official figures, released today, aren't quite as low as forecast (!), they're not far off. For Sega Sammy's financial year from April 1, 2007, through to March 31, 2008, net sales were down 13 percent over the previous year to ¥458.9 billion ($4.4 billion). Both operating and net income were in the red, with the company's operating loss hitting ¥5.8 billion ($55 million) and net loss at ¥52.5 billion ($500 million).

Sega Sammy pointed out a number of reasons behind the numbers. Its pachinko business in Japan continued to decline, with machine sales falling by 24,000 units to 108,000 units, and it had postponed a number of major pachinko machine titles until fiscal 2008.

The minus figures also included impairment losses for Chinese businesses, and a cancellation fee for ceasing development of an entertainment complex in Minato-ku. The company also dissolved Sega Amusements Singapore along with Sega Korea, in order to "increase operating efficiency in the amusement machine sales business."

Game sales were up overseas, but down in Japan--2007 saw the release of Sega titles including Condemned 2: Bloodshot, Mario & Sonic at the Olympic Games, and Viking: Battle for Asgard. The company sold just under 27 million games in total during fiscal 2007, an increase of 5.7 million over the previous fiscal year. Nonetheless, only a small amount of these sales came from its home nation. In Japan, 2.6 million games were offloaded onto the public, compared with 12 million in the US, 12.3 million in Europe, and 70,000 in other regions.

Sega stated that Mario & Sonic at the Olympic Games was a best-seller overseas, whereas the third part in the Yakuza action adventure series, Ryu ga Gotoku Kenzan, fared well in Japan.

Despite the year's losses, the company remained upbeat about the outlook for fiscal 2008. It believes that the group will return to profitability, forecasting consolidated net sales of ¥470 billion ($4.5 billion), consolidated operating income of ¥15 billion ($143 million), and net income of ¥5 billion ($48 million). Sega Sammy concluded that it expected its game sales to once again "show healthy growth" overseas, although it made no new announcements regarding upcoming games.