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To: phileasfogg who wrote (13992)	1/31/2001 8:06:23 AM
From: Jim Oravetz	Read Replies (1) \| Respond to of 14266

UPDATE 4-Sega dumps flagship Dreamcast game machine By Yuka Obayashi TOKYO, Jan 31 (Reuters) - Japan's Sega Corp pulled the plug on its Dreamcast game machine on Wednesday, announcing it would suffer a record loss by ending production of the loss-making console in March in a dramatic refocusing on video game software. The world's third-biggest maker of game hardware and software said the shutting down of Dreamcast will generate 80 billion yen ($689 million) in extraordinary losses, leading to a consolidated net loss of 58.3 billion yen in 2000/01 ending March 31. That exceeded analysts' forecasts for a 50 billion yen special loss to abandon Dreamcast, the world's first Internet-compatible video game machine when it was launched in 1999 that grew famous for characters like 'Sonic the Hedgehog'. Sega's dream of the world's first 128-bit console wired up for online gaming taking the market by storm quickly faded into a nightmare as the machine floundered against smoother, faster rival machines from Sony Corp (6758.T) and Nintendo Co (7974.OS). 'We will rapidly shift our focus to the content business,' Sega said in a statement on Wednesday. A 85 billion yen fund injection by Sega chairman and president Isao Okawa will help staunch the red ink, and most analysts applauded Dreamcast's end as a key step towards profitability for a company facing four straight years of losses. 'This is positive in a sense that bleeding is finally going to be staunched,' said Hajime Yagi, senior portfolio manager at Meiji Dresdner Asset Management. 'Sega would be able to make the better use of its strong team of software creators by letting them make games for more widely-used consoles, rather than Dreamcast,' said Yagi. SEGA TO EMBRACE PLAYSTATION, XBOX Sega said it will now focus on returning to the black by providing game software content and entertainment titles to other video game makers, including Sony, Nintendo and Microsoft Corp (MSFT.O), whose new game console system 'XBox' will be launched this fall. 'Up until now, our business model was to sell a variety of software for a single affordable game machine...but maintaining the balance between our hardware and software enterprises while securing profits has become extremely difficult,' it said. Sega's shares have surged about 60 percent since last week on relief that the company appeared set to cut its losses on Dreamcast and play to its perceived strengths by supplying games to other makers. Sega ended Wednesday trade 2.74 percent higher at 1,690 yen prior to the announcement. Analysts said Sega's tough decision to exit what it considered its core business was encouraging and would push the company back into the black in the next business year. Sega said it will continue making games for existing Dreamcast machines, but analysts said it would be better off it concentrated on making games for machines like Sony's PlayStation system, the world's top-selling video game machine. 'In a best case scenario under which Sega completely stops developing games for the Dreamcast, the shares would have the potential to rise to 2,500 yen,' said Daiwa Institute of Research analyst Eiji Maeda said. The move came as no surprise to the industry and investors after Sega said last week it was considering such a move, although it would continue to focus on its software business and to support the machine with software. Sales of the Dreamcast have struggled since its launch just over two years ago in the face of strong competition from Sony's PlayStation consoles, including the new Internet-enabled and DVD (digital versatile disc) video-playing PlayStation 2. Sega slipped deep into the red, managing to sell 5.87 million Dreamcast machines worldwide by the end of September 2000, compared to the 79.61 million PlayStations shipped by Sony at the end of last year. Rival game software maker Electronics Arts Inc (ERTS.O) said that Sega will face a tough struggle to provide software for other platforms, because it would be handicapped by unfamiliarity with the programming requirements of rival consoles and the long development cycle for video games. 'They're starting from scratch,' said John Riccitiello, president and chief executive of EA, which is the top game vendor for Sony's PlayStation 2 in the U.S. 'It's not quite as though this is GM saying we'll make BMWs, but it's the same kind of proposition,' said of the rival gamemaker. 'They may look like BMWs, but I doubt if they'll drive like BMWs.'