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Sega Reports Lower Profit On U.S. Losses

May 17, 1996

TOKYO (AP) _ Sega Enterprises Ltd. said Friday its net profit fell 18 percent in the last fiscal year on more losses in the United States from a delayed introduction of its newest game machine.

For the year ended March 31, Sega’s net earnings fell to 4.21 billion yen ($39.7 million) compared to 5.12 billion yen in the previous period. Sales rose 0.3 percent to 384.82 billion yen, compared to 383.58 billion yen.

After reporting earnings, Sega announced it cut the price of its new Sega Saturn game machine to $200 from $250, matching a new reduced price for Sony Corp.’s Playstation machine. Sega and Sony are competing with the new Nintendo 64 in a rollout of more advanced machines to revive the video game market.

Sega said U.S. sales were hurt by a later-than-planned release of the 32-megabit Sega Saturn. Also hurting Sega’s U.S. operations were high inventories of the 16-megabit machines amid flagging demand, the company said.

Analysts said Sega blundered the marketing of its new 32-bit game machines in the U.S. and mishandled allocations to retailers in the latest year.

Price-cutting and intensive marketing this year may help the company fend off a fresh foray from Japanese rival Nintendo Co., which plans to launch its new Nintendo 64 system in Japan in June and in the United States on Sept. 30.

The company said it expects new products and increased sales of its Sega Saturn game machine to bolster its results this year.

``Consumer-generated business in the U.S. is Sega’s most important problem,″ said Yutaka Sugiyama, senior analyst and director or research at UBS Securities Ltd. in Tokyo.

Sugiyama, noting that Sega suffered an 18 billion yen operating loss in the U.S., said the company’s decision to focus on its new 32-bit Sega Saturn game machine may enable the company to narrow the operating loss in the U.S. this year.

Sega said it expects profits in Europe to improve in the current year, while the company’s U.S. business is expected to remain under pressure.

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