Sega to Build Future on Software, Not Hardware

Yesterday in Tokyo, Sega held a news conference to reveal the state of the company and its future direction.

The company said that it had lowered inventories substantially. Huge stocks of older 16-bit, and Game Gear hardware and software pushed Sega to cut prices of older products in order to reduce its inventory. Because of that, Sega said yesterday that its group inventories fell by a value of 16.5 billion yen in the last fiscal year.

A Sega executive revealed that the company will shift its focus from hardware to software in the fiscal year beginning April 1, 1997, but would not stop producing Saturns. He also said that shipments of the system are expected to decline this year to 1.9 million units worldwide from 4.16 million the previous year. The decline in shipments will help cut losses from Sega's current hardware operations.

The company's consumer division, which includes the Saturn and other game machines, is expected to take a 46 percent drop in sales to 88 billion yen this year.

A renewed focus on software could be what Sega needs to pull itself out of the trouble the Saturn has led it into, at least in the US. Such a large fall-off of Saturn production indicates that either Sega is leaving the hardware market altogether or is going to bank on something new in the near future.

While previous statements from Sega indicate that it plans to focus on keeping consumers happy with new software, it's hard to imagine that producing Saturn software with little or no help from third parties will sustain its business for long.

With E3 less than a month away, Sega's future Saturn software plans will soon become clear.