Sega Enterprises Ltd has seen its Sega Saturn video game console beaten into a poor third place by rival machines from Sony Corp and Nintendo Co Ltd, and the Japanese giant has been forced to concede defeat, at least for now. Late on Friday, it issued a revised group forecast for the year to March 31 which predicts pre-tax losses of $72m, as opposed to an original forecast of $164m in profits. Sales are also down 12% on earlier estimates to around $2.7bn. The dismal performance stems from poor sales of the company’s Sega Saturn console, and the destruction to group profits comes from a forced write off of $366m at subsidiary company Sega of America Inc, which has accumulated heavy losses. A further loss of $82m will stem from the write down and disposal of remaining stocks of Saturn. Newspaper reports in Japan say that distribution of the Sega Saturn in the US are to be discontinued at the end of March are unconfirmed. The announcement should come as no surprise because the same thing happened in January last year, with the Saturn already beginning to look like an also-ran next to Sony’s more expertly marketed Play Station. And in January this year, Sega of America announced it was to lay off 30% of its workforce. But Sega Enterprises, historically a competent innovator, is planning to re-emerge in 1999 with a new machine based on next generation 128-bit technology. The new console will be capable of linking users in multi-player games over phone lines, and it will be an attempt to leap frog the competition, i.e. Nintendo’s N64, as Sega did initially in the late 1980’s with the (then) revolutionary 16-bit Mega drive. Sega is reputedly working alongside Microsoft Corp, who is helping the Japanese company to develop games for the 128-bit machine, running on the Windows CE platform. The aim is to cut down the cost of adapting arcade and console games to the PC platform, but Microsoft’s pedigree in arcade-style games development is unlikely to strike fear into the hearts of the competition.
