Sega Pulls Plug On Saturn Ahead Of Forecasted Losses

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March 13, 1998 (7:09 AM EST)

Sega Pulls Plug On Saturn Ahead Of Forecasted Losses

By Andrew Craig,

Japanese games console manufacturer Sega Enterprises has blamed "fierce competition" in the U.S. gaming market for its decision to withdraw its Sega Saturn console from the American market, and for its expected financial losses incurred during the past 12 months.

Sega will write off an anticipated loss of approximately 40 billion yen ($309 million), accumulated by its American division, the company said in a statement Friday. While scrapping the 32-bit Sega Saturn console in the United States, the company said it will seek alliances with software giants including Microsoft to support a new "powerful platform."

Sega has revised its original forecasted financial results, which had anticipated a net profit, to show an expected net loss for the worldwide group of 32.8 billion yen ($253 million) during the 12 months to March 31, a long way down from the net profit of 2.03 billion yen ($15 million) recorded during the previous year.

Consolidated group sales for the fiscal year fell by 21 percent from 432 billion yen ($3.34 billion) in fiscal 1997 to 343 billion yen ($2.65 billion) in 1998.

The parent company, Sega Enterprises, said it expects a net loss of 39 billion yen ($301 million) this fiscal year, a large drop from the net profit of 5.57 billion yen ($43 million) posted in fiscal 1997. The company also forecasted a 25 percent fall in sales to 271 billion yen ($2.09 billion), during fiscal 1998.

The Sega Saturn, which competes with Sony's 32-bit PlayStation console and Nintendo's 64-bit N64 console, will be withdrawn from sale in the U.S., said a Sega spokesman in the United Kingdom Friday. It will "not be supported in the U.S., but will be in Europe," he said, adding that more games are being developed for the platform in Europe.

But even in Japan, the Saturn was only "successful in attracting core game players," the company said in a statement. As a result, Sega "will focus on developing a powerful platform" to attract a wider range of customers and support from a wider range of third- party software publishers, the statement said. This could be achieved, the company said, "by establishing alliances with such key industry players as Microsoft."

The company said it had also been hit by "declining personal spending." This had hit its amusement machines and arcades business hardest, reducing profits from these operations 7.7 billion yen ($59 million) below previous forecasts.

In January, Sega blamed disappointing sales of the Saturn console for its decision to ax 25 percent of its work force at Sega of America, which consists of about 100 employees. The restructuring at the subsidiary followed sales of just 1.7 million Saturn units in the U.S., compared with sales of more than 20 million units of 16-bit Genesis, Saturn's predecessor.