Sammy Corporation, makers of games such as Guilty Gear, has announced that they will be merging with SEGA effective October 1st. The resulting company will be led by Sammy president Hajime Satomi. Expect more information shortly, as the two companies will be holding a briefing sometime soon regarding the details of this merger.
Source: *Planet Gamecube*Full press release is as follows
TOKYO (Reuters) – Japan’s Sega Corp., suffering after sports video games flopped in the U.S., said on Thursday it would merge with ‘pachinko’ game machine maker Sammy Corp. and it cut its 2002/03 profit forecast by 90 percent. The merger, scheduled for October, means that Sega, Japan’s largest game arcade operator and creator of videogame character Sonic the Hedgehog, has abandoned plans to restructure on its own and has turned for help to financially sound Sammy, Japan’s largest maker of pachinko pinball-style machines.
The deal will create a firm with a combined market value of $2.4 billion, with Sega accounting for around 54 percent. “By combining Sammy’s high growth power in pachinko game systems and Sega’s strength in software development and in the arcade business, we can create a globally known, comprehensive entertainment firm,” Sammy President Hajime Satomi, who will lead the new entity, told a news conference.
After pulling out of the game console business in 2001, Sega has been struggling in its efforts to become the leading global game publisher, pulled down by its performance in North America. Sega posted its fifth consecutive annual net loss in 2001/02 and as of December it had interest-bearing of 84.2 billion yen. Satomi played down concerns that Sega’s weak balance sheet would hurt Sammy’s healthy financial base.
“Sega is suffering from losses in consumer game software and overseas operations, but the overseas business has been in large part restructured and videogame operations should be able to generate a profit with Sega’s high technological skills,” he said. The two firms were leaning toward an outright merger, he said, without specifying which would be the remaining entity.
They will also consider a scheme to merge under a holding firm, with a decision possible as early as March, he added. “We want Sega President Hideki Sato to remain one of the core management members after the integration,” Satomi said. Analysts said the merger move was not surprising, given the recent fortunes of the two firms.
“Pachinko makers are generally flush with funds and want to expand their business, so it makes sense for them to tie up with a company like Sega, which is having difficulty in boosting profits,” said UFJ Tsubasa Securities analyst Takashi Oka. Garish pachinko parlors are ubiquitous in Japan, filled with devotees transfixed by the beeps and clangs as tiny metal balls whirl around the upright pinball machines.
Highlighting its problems, Sega slashed its group net profit forecast for the year to March to 500 million yen ($4.12 million) from a previous forecast of five billion, due largely to poor U.S. sales of “Sega Sports NFL 2K3,” an American football simulation game released in August. Analysts said the downward revision was expected as its problems in the U.S. were well known.
Sega has conceded victory to its U.S. rival, Electronic Arts Inc, and its American football game “Madden NFL 2003.” Sales of another sports game, “NBA2K3,” recently launched in the United States were also lower than its original estimate.
The deal with Sammy comes as Japanese videogame software makers face rising development costs to create games for advanced systems such as Sony Corp’s PlayStation 2 and Microsoft Corp.’s Xbox in a heavily saturated market.
In a bid to reduce costs and fight off competition, Sega’s rival, Enix Corp., known for its blockbuster “Dragon Quest” series, and Square Co. Ltd., maker of “Final Fantasy,” are to merge in April. Shareholders approved the merger on Thursday.
Tokyo-based Sega has shifted its focus to software development in consumer games since pulling the plug on its loss-making Dreamcast game console but it has failed to attract a wide range of global consumers due to stiff competition. Sega said it had decided to postpone the domestic launch of two major game titles for Sony’s PlayStation 2 console — originally planned in March — to some time after April, which would also drag down its earnings for this business year.
Sega’s group net profit totaled 3.98 billion yen in the nine months through December on sales of 150.7 billion yen. Those weak earnings contrasted with the profit of 12.74 billion yen for the nine months reported earlier by rival Konami Corp., helped by robust U.S. demand for its popular “Yu-Gi-Oh!” card game and solid videogame sales. That surpassed Konami’s profit estimate of 11.5 billion yen for the full-year through March, which was made in November.
Source: *N-Philes