Nintendo to buy Sega ?

Tokyo: The president of Nintendo said Wednesday there is no chance the Japanese video game maker will buy Sega, denying a report that Nintendo is in talks to buy its rival for about $2 billion. The New York Times, citing executives close to the negotiations, reported Wednesday that talks had been going on for months and that the terms of a deal were still being negotiated.

"There is absolutely no chance that Nintendo will buy Sega," Nintendo president Hiroshi Yamauchi said in a statement. The report caused Sega's shares to jump 10.5 percent before the Tokyo Stock Exchange suspended trading about 30 minutes before the market closed.

Nintendo, the world's second-largest home video game maker, fell about 4 percent as investors dumped shares on concerns that the possible takeover of the loss-making Sega would mean a heavy burden for Nintendo. The paper also said Sega chairman Isao Okawa has been looking to sell the company for some time and has also talked to U.S. software giant Microsoft about a deal. "The report is absolutely groundless. We are not talking with Nintendo or anyone on such a deal," a Sega spokeswoman said.

Analysts doubt deal
Most industry analysts doubted Nintendo would buy Sega and take on its hefty debt and rising hardware inventories.

"We see little chance of the deal coming true since there are no incentives for Nintendo to buy Sega," said Nomura Securities analyst Yuta Sakurai. "Nintendo has already 700 game creators, and it would not need another 900 creators from Sega. Also, Nintendo has no intention to become a game arcade operator."

Sega, the world's third-largest home video game maker, has been struggling to stay afloat amid increasing competition in the game industry, fuelled by aggressive sales promotions by industry leader Sony, maker of the popular PlayStation game consoles.

In October, Sega warned investors that it expected a consolidated net loss in the current business year, a fourth straight year of red ink. "Risk factors for Sega such as a possible loss widening in the current business year will also keep Nintendo away from such a deal," said Nomura's Sakurai.

Zachary Liggett, game software analyst at WestLB Securities, said he had a hard time believing the Nintendo-Sega link. "I could see a media company interested in Sega, but Nintendo has pretty much what they need to execute their strategy."

There has been some speculation that U.S. software giant Microsoft, due to enter the video game market next year with its high-spec Xbox game console, may be a potential saver of Sega. "Even if Microsoft is interested in joining hands with Sega, it would not rush to make such deal," said a game analyst who declined to be identified. In October, Sega also unveiled a new business strategy that included plans to provide game software for rival makers' consoles, a sign that it is shifting its focus to software from loss-making hardware.

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