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Square Enix 'struggling to achieve expected return on console investment'

Publisher posts nine-month loss, but expects to make a full-year profit

Square Enix has swung to a loss for the first nine months of the financial year as it struggles to make a return on its investment in the 'challenging' console market.

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The Sleeping Dogs and Hitman publisher posted a loss of 5.7 billion yen (£39.1 million) for the three quarters ended December 31, compared to a profit of 5 billion yen (£34.5 million) for the same period the previous year.

However, sales actually rose 7.4 per cent year-over-year to 102.8 billion yen (£705 million), and the firm has predicted a return to profit for the full business year ending March 31, although not at the level it achieved for the previous 12 months.

Square said in a statement: "During the nine-month period ended December 31, 2012, the Company has not recovered the operating loss posted in the six-month period ended September 30, 2012, primarily due to the increasingly difficult condition of the world-wide console game market, under which the Group is struggling to achieve a fair expected return on its investment."

In contrast, the Japanese firm said content for other platforms such as PCs, smartphones and social networking services "are generating an acceptable profit", while the operation of Wii MMO Dragon Quest X - which is also set for release on Wii U - "has been showing steady progress".

While the company described its amusement facilities business as "stable", it said the "sluggish performance" of arcade game machines also contributed to "unfavorable sales and earnings".

Square added: "The Company views the expansion of content and services that conform to emerging customer needs led by the fundamental change in the business environments, and the launch of full-scale commercial services for major MMO titles will establish its profit base, and is focusing all efforts on an earnings recovery from now on."

For the 12 months ending March 31, 2013 the company expects sales to increase 17.3 per cent year-over-year to 150 billion yen (£1 billion), but profit to decline 42.2 per cent to 3.5 billion yen (£24 million).

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