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Game's Over: Troubled Sega Agrees to Merge With Sammy
By KEN BELSON
OKYO, Feb. 13 — The Sega Corporation, the embattled video game maker, said today that it would merge with the Sammy Corporation, a leading manufacturer of pachinko gaming machines.
The deal, which is expected to be completed on Oct. 1, ends years of speculation about one of the oldest names in the game software industry. Sega, which also slashed its profit forecast by 90 percent, has struggled to compete with Sony, Nintendo and Microsoft, which all make high-powered video game consoles.
Microsoft has been looking for partners to make software for its X-Box console and was thought to be interested in forming an alliance with Sega.
By combining forces with Sammy, though, Sega hopes to concentrate on its software for game arcades. Most pachinko machines are now driven by computer chips that determine the game's winnings. Sammy will also be able to expand beyond the pachinko industry, where sales have declined 10 percent since 1995, and bolster its own operations making software for home video games.
The companies hope to "make full use of our synergies developing technology in the amusement and consumer arenas and combining Sammy's rapid growth with Sega's brand name," Sammy's president, Hajime Satomi, said in a statement.
The new company will have combined sales of 371 billion yen ($3.1 billion) and employ 1,750 workers.
Sega, though, will take a back seat to Sammy. Mr. Satomi will lead the new company, even though Sammy's stock market value is about 20 percent smaller than Sega's. Sammy's sales have more than tripled in the last three years while Sega's plunged 40 percent.
Sega, which has lost money for the last five years, also slashed its profit forecast for the fiscal year that ends on March 31. The company now expects to make just 500 million yen ($4.2 million), 90 percent below its earlier estimate. It trimmed its sales forecast 2.5 percent as well.
Sega, an early pioneer in the home video industry, headed for trouble in the mid-1990's after Sony introduced its PlayStation console. The game was an instant hit and Sony has sold 50 million units of its follow up version, PlayStation 2. Nintendo, too, has cashed in on its GameCube console and portable GameBoys.
Trying to keep up, Sega spent more to develop new games and also expanded its amusement operations. But saddled with growing debts of nearly $3 billion, the company started ditching operations. In 2001, Sega ended production of its DreamCast game console to concentrate more on software.
Debts were cut, but sales plunged. Worse, consumers who bought the DreamCast were left without a new supply of games. While Sega still produces popular games like Mortal Kombat and Sonic the Hedgehog, it must now compete head on with stronger players like the Konami Corporation and the Square Company.
"Once they abandoned their game platform, they became a video game producer like everyone else," said Ortwin Gierhake, a software analyst at West LB Securities in Tokyo. "They are getting killed by Sony and Nintendo."
Also today, shareholders at Square, which is 19 percent owned by Sony, accepted a takeover bid by the rival Enix Corporation.
By KEN BELSON
OKYO, Feb. 13 — The Sega Corporation, the embattled video game maker, said today that it would merge with the Sammy Corporation, a leading manufacturer of pachinko gaming machines.
The deal, which is expected to be completed on Oct. 1, ends years of speculation about one of the oldest names in the game software industry. Sega, which also slashed its profit forecast by 90 percent, has struggled to compete with Sony, Nintendo and Microsoft, which all make high-powered video game consoles.
Microsoft has been looking for partners to make software for its X-Box console and was thought to be interested in forming an alliance with Sega.
By combining forces with Sammy, though, Sega hopes to concentrate on its software for game arcades. Most pachinko machines are now driven by computer chips that determine the game's winnings. Sammy will also be able to expand beyond the pachinko industry, where sales have declined 10 percent since 1995, and bolster its own operations making software for home video games.
The companies hope to "make full use of our synergies developing technology in the amusement and consumer arenas and combining Sammy's rapid growth with Sega's brand name," Sammy's president, Hajime Satomi, said in a statement.
The new company will have combined sales of 371 billion yen ($3.1 billion) and employ 1,750 workers.
Sega, though, will take a back seat to Sammy. Mr. Satomi will lead the new company, even though Sammy's stock market value is about 20 percent smaller than Sega's. Sammy's sales have more than tripled in the last three years while Sega's plunged 40 percent.
Sega, which has lost money for the last five years, also slashed its profit forecast for the fiscal year that ends on March 31. The company now expects to make just 500 million yen ($4.2 million), 90 percent below its earlier estimate. It trimmed its sales forecast 2.5 percent as well.
Sega, an early pioneer in the home video industry, headed for trouble in the mid-1990's after Sony introduced its PlayStation console. The game was an instant hit and Sony has sold 50 million units of its follow up version, PlayStation 2. Nintendo, too, has cashed in on its GameCube console and portable GameBoys.
Trying to keep up, Sega spent more to develop new games and also expanded its amusement operations. But saddled with growing debts of nearly $3 billion, the company started ditching operations. In 2001, Sega ended production of its DreamCast game console to concentrate more on software.
Debts were cut, but sales plunged. Worse, consumers who bought the DreamCast were left without a new supply of games. While Sega still produces popular games like Mortal Kombat and Sonic the Hedgehog, it must now compete head on with stronger players like the Konami Corporation and the Square Company.
"Once they abandoned their game platform, they became a video game producer like everyone else," said Ortwin Gierhake, a software analyst at West LB Securities in Tokyo. "They are getting killed by Sony and Nintendo."
Also today, shareholders at Square, which is 19 percent owned by Sony, accepted a takeover bid by the rival Enix Corporation.
Oh well...
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