CNN.com - Sega says ending Dreamcast an option

By Nic Hopkins
CNN.com Writer

TOKYO, Japan -- Troubled video game maker Sega Corp has confirmed that ending production of its Dreamcast game console is an option.

Sega said in Tokyo on Wednesday it is considering killing off the Dreamcast, less than 24 hours after the company's U.S. division denied reports it would abandon the struggling console.

Sega also confirmed it is in talks to supply software to Sony and Nintendo for use on two rival game platforms.

The news sent shares of Sega soaring 15.75 percent higher in early Tokyo trade, adding to the 18 percent gain from Tuesday on rumours of a software tie-up with Sony.

The latest developments contradict a statement on Tuesday by Sega of America in which it re-affirmed the company's commitment to the Dreamcast, which has lost a duel with Sony's PlayStation and faces more competition with the coming release of Microsoft's Xbox and Nintendo's GameCube.

"Reaffirms its commitment"

The U.S. division said it would support the console, noting in a statement that "the company globally reaffirms its commitment to Dreamcast."

"It is not Sega's policy to comment on rumors and the company has not made any statement regarding ceasing manufacturing of Dreamcast or development for other videogame platforms," the company said.

That comment followed a report in the Nihon Keizai Shimbun economic daily that Tokyo-based Sega would stop production of the Dreamcast and instead supply software for the PlayStation 2 (PS2) and also, perhaps, the Xbox.

Separate reports said Sega would end production of the Dreamcast, which failed to capitalize on production delays with the PS2, at the end of its fiscal year in March.

Flat sales

Sega sold 4.5 million Dreamcasts in the United States from its launch in 1999 to the end of 2000, according to U.S.-based research firm Gartner Group, leaving it an uphill task of reaching a stated target of 7.5 million unit sales by March 2001.

It received another setback when giant U.S. retailer K-mart shunned the Dreamcast in August because of poor sales, while software and game developers are turning most of their attention to the PS2, Xbox and Nintendo's next-generation console, the GameCube.

Last November, Sega reported a 17.98 billion yen ($153 million) net loss for the April-September period, largely due to hefty cuts in overseas sale prices of the Dreamcast game console.

Still, Sega said it had "more than 100 games worldwide coming out for the platform in the next year".

Reuters contributed to this report.