Sega Sammy cuts 560 jobs

Sonic house solicits voluntary retirement from 18 percent of workforce, plans to close 110 arcades; full-year earnings revised downward.

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Another day, another massive round of layoffs for the gaming industry. In tandem with grim fiscal results earlier this year, third-party publishers such as Electronic Arts and THQ as well as first-party hardware makers such as Microsoft have cut head count in bids to staunch hemorrhaging losses. Today, Sega Sammy stepped up to the plate, announcing as part of its disappointing nine-month earnings report that it will cut 560 jobs, or 18 percent of its workforce.

Sega Sammy plans to enact its head-count reduction by calling for an early retirement of the specified number of employees. The company expects to issue this call in two weeks, and plans to conclude its cuts by March 31, 2009, the end of its current fiscal year. It also plans to close an additional 110 amusement facilities, as well as scale back its research-and-development expenditures by 20 percent compared to last year.

Sega Sammy's deep cuts come in the face of slipping revenues and mounting losses. For the first nine months of its current fiscal year, Sega Sammy posted shrinking revenues of ¥309 billion ($3.41 billion), which was down from ¥342 billion ($3.78 billion) during the year-ago period. Losses hit ¥10 billion ($119 million) for the nine-month period, which was actually an improvement over the ¥15 billion ($174 million) Sega lost during the same period last year.

"During the first three quarters of the fiscal year ending March 31, 2009, the Japanese economy faced more severe hardships as pressure on corporate earnings from the ongoing and sharp rise in the yen, the country's worsening job picture, and other factors amid continued turmoil in the global financial markets, raised concerns that the real economy would slow further," Sega Sammy said in a statement.

Though Sega Sammy's primary area of business remains its profitable pachinko machines, the company also draws a significant amount of its revenue from its less-than-profitable video game division. During the reporting period, the segment posted an operating loss of ¥5 billion ($62.4 million) on revenues of ¥96 billion ($1.06 billion) for the period. Sega Sammy said that game sales were led by current fiscal-year releases Sonic Unleashed and Football Manager 2009, as well as continued sales of Mario & Sonic at the Olympic Games.

Sega Sammy doesn't expect its fiscal fourth quarter to prop up flagging financial results for the full year. As part of its earnings announcement today, Sega Sammy revised its full-year sales outlook downward 7.4 percent to ¥435 billion ($4.77 billion), with losses expected to total ¥26.5 billion ($290 million).

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