Square Enix predicts earnings shortfall

Today in Japan, Square Enix released sharply reduced estimated results for its 2005 fiscal year.

The company is now forecasting 15 billion yen ($128 million) in operating profits for the year that endied March 31: a 47 percent drop from its initial estimate of 28.5 billion yen ($242 million).

Square Enix also slashed expected net profits by almost 43 percent, from 17.5 billion yen ($149 million) to 10 billion yen ($85 million). The reduced profits are partially due to a revenue shortfall: The company trimmed its revenue forecast by 8 percent, from 136 billion yen ($1.16 billion) to 125 billion yen ($1.06 billion).

Marquee titles like Kingdom Hearts II and Final Fantasy XII, which Square Enix relied on to drive its bottom line, failed to meet sales targets, the company said in a statement. In addition, the company's online game division and investments in poorly performing games outweighed the positive results for FFXI. The sole bright spot in the company's financials was its film division: Strong sales for Final Fantasy VII: Advent Children drove the division to exceed forecast results.

New acquisition Taito also failed to perform as forecast. The company is expected to lose money for the year, further dragging down Square Enix's consolidated results.

The Japanese financial year runs from April to March of the following year, and Square Enix's final results for FY2005 are now in progress--with a tally due in the next few weeks.