Video game giant Sega Corp. officially announced Wednesday it will halt production of its loss-making Dreamcast game console by the end of March and shift to game software.
The company also said it has revised down its earnings forecast for the current fiscal year that ends on March 31, due mainly to losses related to Dreamcast.
Sega said it will provide software and game-related equipment for other companies’ game consoles, including Nintendo Co.’s Game Boy Advance and Sony Computer Entertainment Inc.’s PlayStation2. It will also continue to sell Dreamcast titles.
Sega currently expects a group net loss of 58.3 billion yen compared with a loss of 23.6 billion yen projected last November, and a pretax loss of 47.9 billion yen against a loss of 18.1 billion yen.
Group sales for the current year have also been revised down to 260 billion yen from 320 billion yen.
To partly make up for the losses, Sega Chairman and President Isao Okawa offered personal assets of some 85 billion yen to the firm, it said.
Sega, which has been struggling to boost worldwide sales of Dreamcast since its launch in November 1998, has been forced by stiff competition to make price cuts resulting in massive losses.
Global sales of Dreamcast were 44 percent below target at the end of last year and game sales were 34 percent short of the company’s goal.
To turn things around, Sega will move away from the hardware aspect of the game console business to focus on the more profitable areas of game development and sales.
The company said it will redouble efforts to restructure its group firms and overseas sales units in a bid to boost its overall corporate strength. “It has become more difficult for us to maintain the balance between the hardware and software aspects of our business,” the company said in a statement.
“We have made the latest decision so we could ensure a recovery of earnings by swiftly moving toward a content-oriented business model, which is our strongest point.”
Competition in game hardware is likely to become tougher. In July, Nintendo is set to release Cube, a next-generation game console, while U.S. software giant Microsoft Corp. plans to launch a new type of console called Xbox in the fall.
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