via wsj

TOKYO -- Sega Sammy Holdings Inc. posted a net loss in the fiscal first half and slashed its full-year forecast while the release of some of its new game machines is behind schedule.

The company, which makes arcade and pachinko parlor machines and video-game software as well as operates video arcades, said it booked a group net loss of 20.27 billion yen ($183.2 million) in the six months ended in September, compared with a year-earlier profit of 38 billion yen.

Its poor business performance reflects the increasing difficulty and costs of developing new arcade-game machines and game titles amid stiffer competition to supply more sophisticated products. Faster transition of consumer demand has also shortened the product life cycle.

Through the fiscal year ending March, Sega Sammy expects 1 billion yen in group net profit, well below its previous estimate of 35 billion yen.

Sega Sammy's interim group sales fell 19% to 231.05 billion yen from 283.55 billion yen. It now forecasts full fiscal year sales of 540 billion yen, down from the previously estimated 670 billion yen.

It would be the worst earnings results for Sega Sammy since the company was formed in October 2004 through a merger of Sega and Sammy.

The company said sales of pachinko machines, arcade equipment and game-software titles won't meet their original targets this fiscal year.

In its biggest business, pachinko machines, the company didn't receive regulatory approval for certain products as early as expected, and the launch of some models was delayed for quality-control reasons.

Its supply of some new arcade machines is also falling behind schedule, while its arcade operations are struggling in the absence of new hit products.

In the consumer-products division, the cost of developing video-game software is increasing as the company tries to better meet consumer demand, Sega Sammy said. Software sales are faring well overseas, but domestic shipments will likely fall short of its forecast, it said.

Sega Sammy's financial results are based on Japanese accounting standards.