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Like the Commodore Amiga and the BETA VCR, another case study in the ability for inferior technology to triumph through shrewd business strategy, the Dreamcast system, is now toast.

Borrowing a page from the Microsoft employee handbook, SONY has effectively FUDed Dreamcast out of the Console business. The question is, can Microsoft FUD SONY?

-Ian.

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http://dailynews.yahoo.com/h/ap/20010123/tc/sega_dreamcast_3.html

Tuesday January 23 5:23 PM ET Sega Corp. Reportedly Halts Dreamcast

NEW YORK (AP) – Sega Corp. is reportedly planning to stop the production of its Dreamcast game console by the end of March, focusing its efforts on developing and supplying its home software games to such rival companies as Sony Computer Entertainment and Nintendo Co.

Sega will no longer accept new orders for Dreamcast, instead only assembling units from parts in inventory, according to a story in Tokyo-based The Nihon Keizai Shimbun’s Wednesday edition.

Sega of America issued a statement late Tuesday, saying the company does not comment on rumors.

Sega “globally reaffirms its commitment to Dreamcast. In fact, Sega has more than 100 games worldwide coming out for the platform in the next year.”

Industry analysts, however, said such moves would make sense, though and could help reverse the fortunes of the company, which has been struggling with sluggish sales for the past several years.

The Tokyo-based Sega, which trails behind Sony Corp. and Nintendo in U.S. market share for consoles, was expected to benefit from Sony’s well-publicized shortages of PlayStation 2, introduced in the U.S. last October, and Sega Dreamcast’s new online connection.

Last fall, Sega slashed prices of its Dreamcast console to $149, from $199, and offered $150 rebates to spur sales.

However, revenues of Dreamcast were disappointing for the holiday season, as consumers appeared to be holding off their purchases of consoles until new models came out. Later this year, Microsoft Corp., armed with a $500 million worldwide marketing budget, will be launching its Xbox video game player, and Nintendo will be unveiling GameCube.

U.S. sales of Dreamcast, launched in the fall of 1999, totaled 4.5 million units through December, running below the company’s plan to reach 7.5 million units by March 31, according to the Gartner Group, a research firm based in San Jose, Calif.

“Sega was hoping that its game experience would draw some of those Sony loyalists to their camp, but it hasn’t worked,” said P.J. McNealy, an analyst at Gartner. “Focusing on game software makes sense given how competitive the console market is getting. Sega has strong leverage in the software games area.”

The video game industry struggled with weak sales last year. Sales of game consoles plummeted 20 percent in 2000 to $1.1 billion from $1.4 billion in 1999, according to Port Washington, N.Y.-based NPD Interactive Entertainment. Sales in the total category, which also includes accessories and software, declined 5 percent to $6.5 billion last year from the previous year’s $6.9 billion.

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