TOKYO - Shortly after announcing that it would cease production on Dreamcast, Sega announced a strategic partnership with Palm (PALM), under which the Japanese videogame maker would provide games for Palm's handheld computers.
The detail of the alliance will be announced later, but the company said Sega's offline and online game contents will be available on Palm V and VII platforms this year. On Monday, Sega announced an alliance with Pace Micro Technology (PIC), a U.K.-based group, whereby the companies would jointly develop set-top boxes using Dreamcast technology, in order to go after the market of broadband gamers.
In addition, Sega said that closing its Dreamcast hardware business would probably cost the company about $685.5 million this quarter.
Isao Okawa, Sega's president and chairman, missed the press conference because of a cold. He issued a statement to the effect that he would donate his personal assets, worth about $728.4 million in stocks, to help cover the group's extraordinary loss.
Sega had predicted a net group loss of about $202 million, but now expects a group net loss of about $500 million for the fiscal year ending in March. The company said it hopes to secure additional bank loans.
"I feel mortified," said Hideki Sato, VP of Sega, after the press conference. "We wish we could have continued to do our hardware business. But the market environment is changing too rapidly. We realize now that this is not the era that we can just stick to one business model."
Sega had put its Dreamcast console at the center of its Net strategy. The machine would have competed against Microsoft (MSFT)'s Xbox and Nintendo's GameCube, both of which are expected to launch soon.
Despite bold price cuts, Sega has sold just 6 million units worldwide, including 2.7 million in North America. The company had hoped to sell a million more units by March. Sega was losing about $100 on each hardware sale.
Since late last year, the company has reportedly been a potential buyout target of Nintendo or Microsoft, although the company has denied such speculation. The company has also denied rumors that Okawa might step down as president and CEO.
On the Tokyo Stock Exchange Wednesday, Sega shares closed at 1690 yen ($14.52), up 45 yen or 2.74 percent from Tuesday's closing price.
