Sega financials point northward

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TOKYO--Sega dropped a bombshell today, announcing sharp increases in its financial projections. Japan's financial year begins on April 1, so Sega is currently preparing its first-half earnings reports for the 6-month period ending on September 30.

Final numbers will be available next month, but based on early results, the company has increased its expected revenue for the period to 94.2 billion yen, revealing an increase of 7 percent more in revenue than was originally forecast. Projected profits leapt from 1.2 billion yen to 5.7 billion yen, demonstrating a staggering 375 percent increase for the period.

The firm raised its forecast for the financial year as well. The new revenue projection of 195.7 billion yen represents a 1.4 percent increase, while the profit forecast for the year rose almost 10 percent to 11.5 billion yen. If Sega is able to deliver on these updated forecasts, it will end the year with a 5.8 percent profit margin, which would be far ahead of last year's 3.9 percent profit margin.

This would be an impressive achievement, considering the woebegone state of Japan's economy, which has suffered from a long recession where slow or negative growth and weak consumer spending have been the rule.

Sega attributed its improved forecasts to unexpectedly strong performances from its arcade machine and consumer software divisions. In particular, The Key of Avalon, Dragon Treasure (shown above), Star Horse 2002, and the most recent version of perennial favorite UFO Catcher have driven sales.

It is interesting to note that all these games incorporate role-playing or prize-winning elements, and, as such, don't fall into the category of what we usually consider "arcade games" in the US. For instance, Star Horse 2002 allows players to raise and train a race horse, and players can even bet on race results.

Oddly enough, traditional arcade genres are much better represented among Sega's top console games. Hits in the Japanese domestic market over the past six months include the Initial D Special Stage driving game and Build a J. League Pro Soccer Club! 3, both for the PS2. Sonic Adventure DX (GC) and Virtua Fighter 4 Evolution (PS2) have also both enjoyed strong sales in markets outside of Japan.

Sega's third major division is arcade operations. In addition to selling game equipment to other operators, Sega also runs its own arcade chain, with over 400 locations throughout Japan. Falling slightly short of its revenue projections, this division did not match the success of the other two, but Sega expected that profits for the division would at least reach forecast levels.