NEWS - Tuesday, May 27, 2003


Sega Mulling Sales Ties with EA

TOKYO (Reuters) - Japan’s Sega Corp said on Tuesday it was considering an offer from top U.S. video game producer Electronic Arts Inc (EA) to form a North American sales alliance aimed at shoring up its poor performance in the world’s largest gaming market. Sega Senior Officer Hisao Oguchi, who takes over as president of the Japanese game maker in June, told Reuters in an interview that it had already received an offer to join hands with Electronic Arts Inc. ERTS.O on North American sales of consumer video games. But Oguchi declined to provide details of the offer and said nothing had been decided. "Basically, our U.S. sales subsidiary will continue marketing our products in North America, but we will have to decide if that will be enough as we expand our business in the future," he said. "We will consider forming a sales joint venture in the United States if necessary," Oguchi said. Electronic Arts declined comment on any potential tie-up. "We think it is bad policy to discuss our distribution strategy in the public forum," an EA spokesman said. The North American market has been a thorn in Sega’s side and Oguchi said the company also wants to reinforce the development of video games through alliances with local firms to attract a wider audience in the key U.S. market. EA, one of Sega’s top rivals in the U.S., is a leader in sports simulation games and last year fended off a Sega challenge to its dominance in that sector. BETTER TO JOIN HANDS "We have been badly beaten in the U.S. consumer video game market," said Oguchi, who was one of the principle developers behind hit Sega games such as the domestically popular Derby Owner’s Club. "If we can’t resolve this on our own, then it’s better to join hands with someone." Oguchi, 43, was appointed last week to replace Hideki Sato as part of the company’s effort to rebuild its credibility, which was battered by Sega’s recent wavering on merger talks. Sega lost two merger candidates earlier this month when it scrapped three-month-long merger discussions with "pachinko" pinball-style game machine maker Sammy Corp 6426.T as well as similar talks with video game maker Namco Ltd 9752.T . In addition to EA, Microsoft Corp MSFT.O has also been reported as a potential bidder for Sega but analysts said neither company would be interested in buying all of Sega, which would include its game arcade operations in Japan. What they would want is a star development team or a franchise property -- not the sales and marketing staff or the arcade game operations, an analyst at a foreign brokerage said. Oguchi denied speculation that Sega is in talks with Microsoft on a capital alliance but said "making a special or closer relationship" with a game console maker would be an option when the console makers launch their next-generation systems. "We’ll maintain our multi-platform policy, but we may make an arrangement with a console maker, such as providing our sports games only for a certain hardware," he said. Analysts say Oguchi, who joined Sega straight from university in 1984, would be able to re-engineer the firm’s development strategy, but he may face difficulties in boosting its weak balance sheet. "My task for the first year is to achieve our financial target," Oguchi said.
Source: http://www.reuters.com/

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