Sega Sammy revises earnings forecast

Japan-based publisher's shares fall after it releases a downsized profit forecast.

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Sega Sammy might be best known in the West for Sonic the Hedgehog, but the company makes the majority of its money on pachinko slot machines in Japan.

Pachinko machines are played by feeding metal balls into them, which, when they hit the right parts of the machine, produce more metal balls, which can be exchanged for cash. Pachinko parlours are extremely popular in Japan--the newer versions of the game are called pachislot, and are basically a cross between traditional pachinko and a slot machine.

Recently, however, Sega Sammy has had delays in obtaining government approval for some of its key upcoming pachislot titles, which means that sales in the period of April 1 to September 30 are expected to now total 57,000 units. The amount had previously been expected to be 127,000. The total unit sales of pachislot machines in those six months are also expected to be significantly less: 310,000 instead of the previously forecast 486,000. The revision did not mention the company's video game business.

As a result of these changes, Sega Sammy's net sales are expected to fall ¥80 billion ($682 million) to ¥230 billion ($2 billion). The company is now anticipating only ¥12 billion ($102 million) in operating profit from the pachislot business, which means that the interim-period operating loss is likely to be ¥7 billion ($60 million), and interim period ordinary loss is likely to be ¥6.5 billion ($55 million). After other factors have been taken into account (for example, corporate tax), net loss for the six months is expected to be ¥21.5 billion ($183 million).

Share dividends remain unchanged at ¥30 (26 cents) per share. The company's shares took a tumble on the Japanese stock exchange, and at the close of day were down 141 yen, or 9.1 percent, to ¥1,410 ($12).

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