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Sega Corp. Merging with Pachinko Maker

"Pachinko, a vertical cousin of pinball, is played in arcades in Japan for prizes, much the way Americans may play slots or poker machines where they are legal.

"…The deal, to take effect Oct. 1, ends years of speculation about the future direction of one of the oldest names in the game software industry. Sega, which also reduced its profit forecast for the current year by 90 percent, has struggled to compete with Sony, Nintendo and Microsoft, all of which make high-powered video game consoles as well as game software; Sega dropped out of the console-making business in 2001.

"…By combining forces with Sammy, though, Sega hopes to concentrate on software for arcade games. Most pachinko machines now incorporate computer chips to determine scores and winnings for each game. The deal also gives Sammy a route to expand beyond the pachinko industry, once thought to be recession-proof, where total revenue has slipped by 10 percent since 1995.

"Though Sega is better known internationally and has a market capitalization about 20 percent greater than Sammy's, Sega will take a back seat to Sammy in the combined company. Hajime Satomi, Sammy's president, will lead the combined company, which would have sales of about 371 billion yen (US$3.1 billion) and 1,750 employees if it existed today.

"Sega has posted losses for the last five years, and on Thursday it sharply lowered its sights for the current year, which ends March 31. The company now expects a profit of just 500 million yen (US$4.1 million) -- it had previously forecast earning 10 times that. It also trimmed its sales forecast by 2.5 percent…"

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