Capcom Reports Higher Profits, Despite Lagging Sales

Officials from Capcom have published details of the company’s financial results for the first quarter 2007 ended June 30th 2006, which show a considerable rise in profits...
Officials from Capcom have published details of the company’s financial results for the first quarter 2007 ended June 30th 2006, which show a considerable rise in profits over the previous year, despite a slight decline in sales. The company noted that its net sales for the period were ¥10.57 billion ($91.7 million), a 7.5 percent decline from ¥11.43 billion ($99.2 million) reported during the same period in fiscal 2006. Capcom cited that reason for the decline was that the majority of games sold during this quarter consisted of small-scale titles as well as those titles developed under the collaboration with other companies. However, the company saw a significant rise in both net income and operating revenue for the period. Net income climbed to ¥608 million ($7 million), up from the previous year's ¥608 million ($5.3 million), while operating income saw an even more dramatic increase, rising to ¥1.32 billion ($11.4 million) from the ¥891 million ($7.7 million) reported during the same period the prior year. Regarding the overall video game market, Capcom commented that the environment has leveled-off as consumers wait for the release of next-generation video game platforms, namely the PlayStation 3 and Wii. However, the company added that while the sale of software for home consoles has slowed, the demand for games developed for portable consoles “grew favorably.” Capcom's software sales for home consoles in Japan were led by Okami for the PlayStation 2, a game which has impressed gamers worldwide with its striking watercolor-like visual style and environment-altering gameplay mechanics. Other strong performers for the period included Megaman ZX for the Nintendo DS, and Monster Hunter Freedom for the PSP, which the company remarked continued to grow and contributed to the overall rise in profits. In addition, Capcom noted that Megaman Battle Network 6, which was released in North America for the Game Boy Advance on June 13 as two separate versions subtitled Cybeast Falzar and Cybeast Gregar, achieved “healthy sales.” Outside of the home console and portable market, Capcom's arcade operations saw net sales of ¥2.89 billion ($25.1 million), a 14.4 percent increase over the same period a year ago. Likewise, operating income for the division experienced an increase of 3.6 percent to ¥398 million ($3.5 million). The company commented that it has opened three new arcades in Chiba Prefecture, and has been working to attract additional customers with various strategies to in an effort to “reenergize” this business segment. Arcade game sales increased to ¥2.14 billion ($18.6 million), a 55.2 percent increase from the same time last year., and operating income for the division increased to ¥279 million ($2.4 million), a marked 354.3 percent increase over the previous year. Capcom noted that sales of Mobile Suit Gundam SEED DESTINY: Federation vs. Z.A.F.T. II, propelled by the popularity of the Gundam franchise, drove sales for the company's arcade division. Additionally, Capcom revealed that game distribution within the mobile phone market has been “sluggish”, due to the lack of high-profile titles. The company also acquired Canadian mobile game development company Cosmic Infinity in an effort to “enhance” its overseas strategy where the mobile market continues to grow. Lastly, Capcom saw added revenue from other businesses, mainly character-related licensing royalties and income from real estate leasing.

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