Sega officially exits video-game console market

Compiled from Times wires

© St. Petersburg Times, published February 1, 2001

Sega Corp. gave up in the video-game machine market Wednesday, announcing it will stop making its Dreamcast console March 31.

Once considered the third big game console competitor, along with Nintendo and Sony, Sega hit its heyday in the early 1990s with the Genesis game console. But its subsequent machine, the Saturn, faltered, and deeply disappointing sales of the Dreamcast, introduced in late 1999, appear to have driven Sega from the hardware business.

Sega will start making games for Sony's PlayStation2 and Nintendo's Game Boy Advance machines and was in talks to make games for Microsoft Corp.'s Xbox and Nintendo's Game Cube, which are expected to go on sale later this year. Sega plans to continue making new games for Dreamcast next year.

Sega officials said the company did not have deep enough pockets to market the Dreamcast, of which roughly 6.5-million were sold.

Sega can hope to take advantage of its designers' talents as well as its edge in Internet-linking games. Dreamcast was the first game machine to link to the Net.

With the announcement, Sega doubled its forecast losses for the fiscal year ending in March to $501-million from $203-million forecast in November and made clear it was still in trouble.

Sega must get rid of its worldwide Dreamcast inventory of 2-million machines, shouldering costs of about $601-million, chief operating officer Hideki Sato said. Charles Bellfield, vice president of communications for Sega of America, said Sega plans layoffs, but he did not specify how many of the approximately 3,500 Sega employees worldwide would be affected.

Starting Sunday, Sega plans to slash prices of Dreamcast to $99.95 from $149 at U.S. retail stores, Bellfield said. Sega promised to continue to provide repairs and parts to Dreamcast owners.

- Information from the Associated Press and New York Times was used in this report.

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