SEGA Enterprises, Ltd
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Qx/SEGA SR 98 00.3.21 3:01 PM ページ 1 (1,1) CORPORATE DATA MANAGEMENT’S REVIEW OF OPERATIONS SEGA Enterprises, Ltd. SEGA ENTERPRISES, LTD. FIRST-HALF RESULTS Amusement Center Operations Head Office During the first half of fiscal 1999, ended September 30, 1998, In July, we opened Okayama Joypolis, our latest “amusement 2-12, Haneda 1-chome, Ohta-ku, Tokyo 144-8531, Japan Japan’s severe economic slowdown intensified. Personal spending theme park.” We also developed new attractions for our existing Tel: (03) 5736-7034 was slack, reflecting a deteriorating employment and wage out- Joypolis facilities to increase their drawing power. We launched Branch Offices SEGA Enterprises, Ltd. look. Housing investment and corporate investment, which entered SegaArena Hamaotsu and three other medium-sized amusement Sapporo, Kansai, Kyushu the year at very low levels, dipped further. Other negative factors centers—a category of center that generally can be run very ef- Semiannual Report 1999 included public unease regarding the nation’s financial system and ficiently. Our large-scale multientertainment complexes—en- Date of Incorporation Six months ended September 30, 1998 June 3, 1960 the ongoing currency crises in other Asian nations. compassing movie theaters, bowling alleys, karaoke facilities, Paid-in Capital In the amusement industry, only products that accurately met restaurants, and gift shops—also performed well. consumer trends and provided new innovations in the user experi- ¥39,154 million ence became hits. Amid the economic downturn in Japan and the SECOND-HALF OUTLOOK Number of Employees resulting slump in personal spending, the market as a whole re- On November 27, 1998, the Company introduced Dreamcast, a digi- 4,156 mained stagnant. tal entertainment machine developed by SEGA that embodies the Net Sales In this difficult operating environment, SEGA Enterprises, Ltd., world’s leading-edge technologies. ¥100.9 billion (six months ended September 30, 1998) worked to bolster its marketing capability and develop innovative Dreamcast offers an unprecedented gaming experience. It incor- new products. At the same time, we repositioned our amusement porates a high-speed modem and allows users to log on through PRINCIPAL SUBSIDIARIES centers as “multientertainment” complexes that offer high-quality their phone lines immediately after they unpack their machines. SEGA of America, Inc. services. Nevertheless, the Company was unable to escape the grip Dreamcast users can enjoy games, send E-mail messages, surf the Townsend Center, of the deepening domestic economic downturn and the ongoing Internet, and play network games against opponents in other loca- 650 Townsend Street, Asian currency crises. The Company’s business results were also tions—all on their TV sets. Moreover, the machine’s ultrarealistic San Francisco, CA 94103, U.S.A. negatively affected by the significant loss on write-down of invest- 3-D graphics and lifelike sound far surpass those of any other exist- Tel: 1-415-701-6000 ment securities due to the stagnant Japanese stock market. ing game machine. SEGA Enterprises, Inc. (U.S.A.) As a result of these factors, non-consolidated net sales dropped We released four cutting-edge game titles on the same day as 255 Shoreline Drive, Suite 400, 20.4% from the corresponding period of the previous year, to ¥100.9 the Dreamcast machine itself, including Virtua Fighter 3 Team Battle Redwood City, CA 94065, U.S.A. billion; income before income taxes plunged 88.7%, to ¥1.4 billion; and Godzilla Generation. We are set to release a number of titles in Tel: 1-650-632-7500 and net income plummeted 75.9%, to ¥1.2 billion. the coming months, including the high-speed 3-D action game Sonic SEGA Europe Ltd. Adventure. All in all, Dreamcast has enjoyed a wildly enthusiastic 266-270 Gunnersbury Avenue, Amusement Machine Sales reception in the gaming market. London W4 5QB, United Kingdom In Japan, sales of arcade video game machines were solid. Exam- We will continue with our efforts to breathe new life into the Tel: 44-181-995-3399 ples of successful products included the martial arts game Virtual amusement machine market by developing machines with strong SEGA Operations UK Ltd. On Oratorio Tangram and the driving game Daytona USA 2. In re- drawing power. To this end, we will introduce the newly developed FINANCIAL HIGHLIGHTS cent years, sales of the Making Club Series—Print Club, Name Naomi system, a high-performance, cost-efficient 3-D computer Unit 2, Industrial Estate, Club, and Stamp Club—exceeded all expectations as such prod- graphics board that has component synergies with the Dreamcast Leigh Close, New Malden, ucts took hold as a fashion statement among the nation’s youth. system. We expect that the Naomi system board will be the stan- Surrey KT3 3NL, United Kingdom However, such pop culture phenomena are almost impossible to dard of the amusement industry. Tel: 44-181-336-2256 SEGA Enterprises, Ltd. Thousands of Millions of yen U.S. dollars sustain, and sales generated by the Making Club Series peaked In amusement center operations, SEGA will concentrate on SEGA Amusements Europe Ltd. For the six months ended September 30, 1997 and 1998 1997 1998 1998 and declined during the period under review. building efficient new amusement centers and developing new Unit 2, Industrial Estate, Overseas, the Company marketed such innovative new machines attractions for our existing centers. We will develop, to an even Net sales ¥126,754 ¥100,932 $745,711 Leigh Close, New Malden, as the above-mentioned Daytona USA 2 as well as Harley Davidson greater extent, a customer-oriented business approach by promot- Cost of sales 93,872 77,339 571,400 Surrey KT3 3NL, United Kingdom & LA Riders. However, these advances were erased by such nega- ing the multientertainment concept and improving the quality of Tel: 44-181-336-1222 Gross profit 32,882 23,593 174,311 tive factors as the Asian currency crises, resulting in an overall service. Operating income 14,384 5,343 39,475 drop in revenue. AMERICAN DEPOSITARY RECEIPTS Net income 5,035 1,213 8,961 January 1999 Depositary Net income per share Consumer Products Sales Morgan Guaranty Trust Company of New York (yen and U.S. dollars) ¥50.03 ¥12.06 $0.09 In Japan, with the release of Dreamcast—our next-generation digi- 60 Wall Street, New York, NY 10260, U.S.A. Notes: 1. The figures herein are non-consolidated and unaudited. tal entertainment machine—scheduled for the second half of fiscal 2. All dollar figures refer to U.S. currency. Yen amounts have been translated 1999, we centered our sales strategy on software for the 32-bit into dollars, for convenience only, at ¥135.35=US$1. SegaSaturn. This, along with solid demand from repeat customers, Shoichiro Irimajiri resulted in strong sales. Representative Director and President In overseas markets, we weighted our sales efforts toward software. Nevertheless, stiff competition and stagnant Asian economies combined to hamper sales. Printed in Japan Qx/SEGA SR 98 00.3.21 3:01 PM ページ 1 (1,1) CORPORATE DATA MANAGEMENT’S REVIEW OF OPERATIONS SEGA Enterprises, Ltd. SEGA ENTERPRISES, LTD. FIRST-HALF RESULTS Amusement Center Operations Head Office During the first half of fiscal 1999, ended September 30, 1998, In July, we opened Okayama Joypolis, our latest “amusement 2-12, Haneda 1-chome, Ohta-ku, Tokyo 144-8531, Japan Japan’s severe economic slowdown intensified. Personal spending theme park.” We also developed new attractions for our existing Tel: (03) 5736-7034 was slack, reflecting a deteriorating employment and wage out- Joypolis facilities to increase their drawing power. We launched Branch Offices SEGA Enterprises, Ltd. look. Housing investment and corporate investment, which entered SegaArena Hamaotsu and three other medium-sized amusement Sapporo, Kansai, Kyushu the year at very low levels, dipped further. Other negative factors centers—a category of center that generally can be run very ef- Semiannual Report 1999 included public unease regarding the nation’s financial system and ficiently. Our large-scale multientertainment complexes—en- Date of Incorporation Six months ended September 30, 1998 June 3, 1960 the ongoing currency crises in other Asian nations. compassing movie theaters, bowling alleys, karaoke facilities, Paid-in Capital In the amusement industry, only products that accurately met restaurants, and gift shops—also performed well. consumer trends and provided new innovations in the user experi- ¥39,154 million ence became hits. Amid the economic downturn in Japan and the SECOND-HALF OUTLOOK Number of Employees resulting slump in personal spending, the market as a whole re- On November 27, 1998, the Company introduced Dreamcast, a digi- 4,156 mained stagnant. tal entertainment machine developed by SEGA that embodies the Net Sales In this difficult operating environment, SEGA Enterprises, Ltd., world’s leading-edge technologies. ¥100.9 billion (six months ended September 30, 1998) worked to bolster its marketing capability and develop innovative Dreamcast offers an unprecedented gaming experience. It incor- new products. At the same time, we repositioned our amusement porates a high-speed modem and allows users to log on through PRINCIPAL SUBSIDIARIES centers as “multientertainment” complexes that offer high-quality their phone lines immediately after they unpack their machines. SEGA of America, Inc. services. Nevertheless, the Company was unable to escape the grip Dreamcast users can enjoy games, send E-mail messages, surf the Townsend Center, of the deepening domestic economic downturn and the ongoing Internet, and play network games against opponents in other loca- 650 Townsend Street, Asian currency crises. The Company’s business results were also tions—all on their TV sets. Moreover, the machine’s ultrarealistic San Francisco, CA 94103, U.S.A. negatively affected by the significant loss on write-down of invest- 3-D graphics and lifelike sound far surpass those of any other exist- Tel: 1-415-701-6000 ment securities due to the stagnant Japanese stock market.