Square Enix FY2006 Nine-Month Period Results Briefing Session

Square Enix reported steady performance across its business segments for the nine-month period ending December 31, 2006. The company revised its full-year fiscal 2006 forecast upward, increasing net sales projections from 150 billion yen to 160 billion yen and operating and recurring income from 19 billion yen to 22 billion yen. While the core Games, Online Games, Mobile Phone Content, and Publication segments remained solid, the company noted a temporary lull in offline console game development as it transitions to new development systems and common engines for next-generation platforms.

A primary focus of the briefing was the restructuring of the Amusement segment, specifically the Taito Corporation subsidiary. To address historical underperformance, the company initiated a strategy to divest from unprofitable ventures, including the commercial karaoke machine business, and scale back the resale of third-party console software. Management also announced plans to close approximately 20% of its game arcades to reduce high fixed real estate costs and reallocate capital toward more frequent game machine updates and improved staff training.

The company’s geographic reach expanded during this period, with overseas markets accounting for a growing share of total unit sales. Despite the challenges of integrating Taito, management reported early signs of success, noting that year-on-year revenues from existing arcade outlets began to outperform industry peers starting in late 2006. The company aims to eliminate all negative legacies within the Amusement segment by the end of the fiscal year, targeting recurring income of 5 billion to 10 billion yen for the division in the coming years as it prepares for a broader operational turnaround.