Sega's profits double despite slow sports game sales

TOKYO--Today, Sega revealed that its profits for the consolidated period from April to December 2003 nearly doubled from the previous year. The company's sales hit 7.66 billion yen ($72.65 million), a 92 percent increase from the 3.98 billion yen ($37.30 million) it made during the same period of 2002. Sega commented that the arcade sector contributed heavily to the company's overall 2003 profit, which is expected to top 9 billion yen ($85 million) for the full year. Together with sales of its arcade cabinets such as Outrun 2, Sega is also profiting from UFO-catcher machines, medal games, and other indoor amusement machines.

As for its consumer sector, Sega comments that it released 13 new console and handheld titles in Japan during Q4 2003. Sales have been reaching expectations with 760,000 copies of games sold during the last quarter, totaling 2.3 million copies since April. In particular, its sport simulation games "Pro Yakyuu team o Tsukurou! 2003" (Let's make a Pro Baseball Team! 2003) and "Derbytsuku3: Derby Uma o Tsukurou!" (Derbytsuku3: Let's make a Derby Horse!) both saw good sales in Japan.

But the news wasn't all good. Sega's overall April-to-December revenue sank 4.1 percent to 144.5 billion yen ($1.36 billion) from 150.7 billion yen ($1.42 billion). While the company acquired a license to use the ESPN brand name in America, Sega's sport games sales fell far below expectations, despite critical acclaim. This cut into its net income in the last quarter of 2003, which was only 1.72 billion yen ($16.3 million), compared to 2.97 billion ($28.1 million) yen in 2002--a 42 percent drop, according to Reuters. Games in other genres picked up some of the slack, helping Sega sell 2.9 million units since April 2003 and 1.15 million units in Q4 2003, despite only releasing five new titles.

While Sega released 10 titles in Europe, overall sales were sluggish due to the delay to Sonic Heroes, which will be released February 6, 2004 in Europe. Last quarter, 520,000 games were sold, totaling 770,000 units for the consolidated nine-month period.

While the overall April-to-December figures were better than expected, company officials braced stockholders for a shortcoming during the calendar Q1 2004 period. Some of the game titles originally planned for release during the current quarter-- namely Dororo and Headhunter: Redemption, will not be out in stores until April. Sega Toys--a part of the Sega group, is also expected to make a downward revision to its sales figures. For its full fiscal year, which ends March 11, Sega expects sales of 190 billion yen ($ 1.79 billion), operating income of 11.5 billion yen ($109 million), and a profit of 8 billion yen ($75.8 million).

Sega has not made any comments regarding the effects of the recent stock acquisitions by Sammy in the mid-term financial report.