Sega Sammy profit plummets 93 percent

Sluggish sales of Sega Sammy's Pachinko slot machines dropped the company's profit almost 93 percent during its first quarter, the company announced today.

Japan-based Sega Sammy Holdings Inc., which owns both Sega Corp. and Sammy Corp., reported a profit of 779 million yen (about $6.8 million). It was a sharp drop from its 10.7 billion-yen ($93 million) take during the same time last year. Pachinko slot machines accounted for just 2.2 billion yen ($19.1 million) of the company's earnings this quarter, compared with 18.2 billion yen ($158.9 million) last year. The company's overall revenue, however, slipped less dramatically--a 15 percent dip to 85.6 billion yen ($746 million).

Sega Sammy blamed higher "upfront development costs" in making games for a loss of 4.06 billion yen ($34.9 million) in its games division--about twice the amount it lost last year. Sales of its video games--particularly those in the Sonic franchise and Noryoku Trainer Portable 2--increased this year to 16.5 billion yen ($143.8 million) from 11.6 billion yen ($101 million). But the company's game-development expenses rose 7 billion yen ($61 million) from a year ago, eclipsing any profit it would have otherwise made.

Sega Sammy insisted that despite the financial setbacks, its previous full-year earnings commitments are still on track.