Over
the Thanksgiving holiday weekend, along with announcing
earnings, which were somewhat disappointing, Sega unveiled big
plans for a restructuring that could have far reaching
implications. The quick and dirty of this plan is that Sega
wants to be more focused on the internet and networking while
also being able to respond more quickly to the market. Sega
plans on making its 10 software development divisions into
independently managed subsidiaries by next April. Some of the
subsidiaries will be spun off to shareholders sometime in
2000. The Company hopes that it then can reduce development
costs by as much as 20 percent. In conjunction with this
reorganization, Sega will be cutting its work force of 4,000
by 25%. (see more from Patrick Klepek here.
What has been the reaction of investors? Well, prior to the
announcement, Seven of 11 analysts surveyed by Bloomberg rated
Sega's stock ``sell,'' reflecting concern the company's
domestic home and commercial video game businesses will
continue to struggle. However, in the past few days some firms
have had a change of heart. Several of the major brokerage
houses have upgraded the Company's stock, including Okasan
Securities, Morgan Stanley Dean Witter, Goldman Sachs, and
Nikko Solomon Smith Barney. Perhaps this is why Sega's stock
has soared 77% to 3,580 yen from just 2,015 yen on November
24.
The most optimistic is Nikko SSB, who raised its rating on
Sega to a 1-Buy, from a 4-sell. The investment firm was very
positive on Sega's new business model and believes that the
market may start to view the company as an internet company as
opposed to a game maker. NSSB believes that the Dreamcast
could one day be viewed as really nothing more than a means of
securing subscribers to the company's on-line services. Also
viewed as positive is the full financial support expressed by
the CSK group, Sega's parent company.
-- Michael
Custer
