FOIB rule #342: Any time a company hints towards or declares itself as being repositioned into a fully-buzzword-compliant market strategy, they’re toast.
Like Atari and Nintendo before them, Sega is now circling the drain. In this case, the dead cat will not bounce. (For those counting, that makes 3 [THREE!] dying company metaphors in one message).
This flop is particularly gratifying since Wired Magazine predicted that Sega would rule the world back in 1993 (see: http://www.wired.com/wired/archive/1.06/sega.html). When WIRED thinks you’re cool, you might as well de-list yourself from the NASDAQ right away.
Sega May Abandon Game Consoles And Enter the Mobile-Phone Arena By Peter Landers Staff Reporter of The Wall Street Journal
TOKYO — Sega Corp.’s flagship Dreamcast video-game machine might be its last pure game console, as the company seeks to push its technology into other devices such as mobile phones, according to people familiar with the company.
Speculation about Sega’s future has grown since it announced in late October that it expects to post a loss of 22.1 billion yen ($190 million) for the year ending March 31, its fourth straight year of losses. The company’s president, 74-year-old Isao Okawa, has been ill, though Sega says he is out of the hospital and on the job. Mr. Okawa personally owns 13% of Sega, and computer-services company CSK Corp., which he controls, owns 24.5%.
Sega spokesman Munehiro Umemura says the company is sticking to a plan, announced Nov. 1, that places three businesses at Sega’s core: game software, network services and amusement arcades. The plan doesn’t commit Sega to producing a successor to the Dreamcast, which has failed to meet expectations despite the slow start of its chief rival, Sony Corp.’s PlayStation 2.
“I think Sega in the long run is going to get out of the hardware business,” says Kazuhiko Nishi, who is the vice chairman of a CSK subsidiary and is close to Mr. Okawa. Mr. Nishi says he doesn’t think Sega will pull Dreamcast off the shelves immediately, predicting instead “a slow, silent retreat with honor.”
People familiar with the matter say a number of companies have considered buying Sega and taken a look at the business. Electronic Arts Inc. of Redwood City, Calif., for instance, was keen on the software component of the business but doesn’t want to absorb the hardware, notably the Dreamcast game console. Industry experts say the one buyer who could easily take on all of Sega would be Microsoft Corp., which is frequently mentioned as a potential buyer.
Mr. Umemura says Sega is still confident that Dreamcast can compete effectively against PlayStation 2, which has suffered from a software shortage. Asked whether Sega will build a stand-alone game machine to succeed the Dreamcast, Mr. Umemura says Sega isn’t giving any thought now to a next-generation machine. But he questions whether Sega’s rivals also will make game consoles in the future. “We have to ask whether [a dedicated game console] can really exist in the next era,” Mr. Umemura says.
One advantage to withdrawing from dedicated game consoles would be to give Sega’s talented game designers a chance to spread their wings by making games for Sony, Nintendo Corp. and Microsoft. Nintendo and Microsoft are coming out with advanced game machines next year. “From a theoretical position … it makes no sense to keep the costly hardware business,” says Shuji Honjo, a former Sega manager.
A hint of Sega’s direction came in November, when the company announced a deal with Motorola Inc. to put Sega games on a line of Motorola mobile phones that go on sale next year in North America. Observers say Sega might seek to sell its hardware division rather than shut it down, but Mr. Honjo said the division’s financial woes make a sale unlikely.
A sale of the entire company is considered unlikely. One reason is a dearth of buyers. Nintendo’s president described as “100% impossible” Wednesday’s report in the New York Times that it is a potential suitor. Also, Mr. Okawa may not be willing to sell. He boosted his stake in Sega this year, and denies even talking about a deal with Nintendo. Mr. Nishi said he didn’t think Mr. Okawa would want to unload Sega at its current depressed price. — Nikhil Deogun in New York contributed to this article.
Write to Peter Landers at peter.landers [at] wsj [dot] com