Square Enix slashes six-month forecast by 10%

Japanese publisher says "smaller growth" of new software spurred revenue revision down to $843 million, profit to $21 million.

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Square Enix began its current fiscal year on the lifting wings of a dragon--Dragon Quest Monsters: Joker 2, that is. During the April-June period, the Japanese publisher saw production enough out of the DS title to post a ¥1.81 billion ($22.5 million) profit on revenues that were up 11 percent from the prior year to ¥32.5 billion ($403 million). However, Square Enix has been unable to sustain that pace through its second fiscal quarter.

Front Mission Evolved was among Square Enix's releases during its problematic second quarter.
Front Mission Evolved was among Square Enix's releases during its problematic second quarter.

With Square Enix expected to release its six-month earnings later this week, the publisher today preannounced a severe downward earnings revision for the April-September fiscal period. Having previously forecast sales of ¥76 billion ($942 million), Square Enix now expects to pull in ¥68 billion ($843 million) for the period, a 10.5 percent decrease.

Profit projections also fell sharply. With initial six-month income estimated at ¥2.4 billion ($29 million), Square Enix now expects to bring in ¥1.7 billion ($21 million), a change of 29.2 percent.

As for the why, Square Enix said new game software releases saw "relatively smaller growth," though no specific titles were named. Square Enix released a handful of high-profile titles during the period. Included among these was the tepidly received Front Mission Evolved, as well as Kingdom Hearts: Birth by Sleep, Kane & Lynch 2: Dog Days, and Lara Croft and the Guardian of Light.

The publisher also attributed its revision to an appreciation of the yen in foreign currency markets, as well as losses associated with the sale of equipment and property and a change in accounting standards.

Square Enix believes it will be able to compensate for the second-quarter weakness through the rest of its fiscal year. Therefore, the publisher said that it has not revised its full-year earnings projections.

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