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Narrowing Losses, Ongoing Challenges For Sega's Consumer Biz

Sega Sammy Holdings saw an $80.8 million profit in its fiscal first quarter, but while its home game business narrowed its losses, the company is still plagued by overseas market challenges.
While many major Japanese game companies seem to be struggling to stay healthy in the face of a strong yen and Western market factors -- Capcom yesterday posted a dramatic 90 percent profit decline and Nintendo opened up a $288.4 million loss in its first quarter -- the picture is a bit better for Sega, which turned a profit in its own first quarter report today. Sega Sammy, the holding company that is parent to a group that also includes arcade and pachislot businesses alongside Sonic house Sega's consumer software operations, saw a 7 billion yen ($80.8 million) profit for the three months ending June 30. Contrast that with a 10.3 billion yen ($118.9 million) loss in the same period last year. Sales are also up, rising 51 percent year over year to 91.3 billion yen ($1.05 billion). But the company still struggles with declining overseas sales, with 3.3 million software units sold in total -- largely contributed by Iron Man 2 and Alpha Protocol -- the latter of which received a tepid critical reception, and according to Sega West president Mike Hayes, "hasn't sold what we've expected." "Demand was generally weak in the U.S. and European markets due to the headwind like sluggish personal consumption," the company said. The consumer business, which includes home video games, individually reported a 636 million-yen ($7.4 million) loss, then -- but the figure represents a drastic narrowing on the 4.5 billion-yen ($52 million) loss in the segment for the same period a year ago. But the company's largest share still comes from overseas markets -- about half, or 1.68 million units, of its total software sales came from North America, with most of the remainder in Europe. Sega sold just 270,000 units on its home shores of Japan during the quarter. Like Capcom yesterday, Sega stated its intention to address its challenges with a push into the mobile and social game market: "The Group needs to adapt to changing business environment in which the market demand for new content geared to social networking service (SNS) and smartphone is expanding," said Sega.

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