Sega loses head of European division: Resignation will alarm computer games industry

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NICK ALEXANDER has quit as chief executive of Sega Europe, the troubled European arm of the giant Japanese computer game company. He will leave at the end of April to join 'a broadly-based media group.'

His departure seems likely to spark off a further bout of nervousness in the computer games industry, which is suffering from disappointing sales, overstocking by retailers and a retail price war.

Uncertainty about what Sega and its rival, Nintendo, are planning to do about their unsold stocks is causing particular concern. The fear is that if either decides to retrench, the stocks could be sold at knock-down prices that would depress the market.

At a traditionally quiet time for the industry, Sega is estimated to be carrying up to four months' worth of stocks - valued at more than pounds 125m.

Mr Alexander is thought to have decided to leave after growing increasingly unhappy at the way Sega Europe's Japanese parent insisted on expansion and Far Eastern sourcing when the strength of the yen made such growth uneconomic.

'They kept forcing him to try and grow Sega's market share, even though he had to operate on negative margins,' said one observer.

Sega Europe lost more than pounds 100m in the year ended February, three quarters of which related to higher costs as a result of currency switches. The remainder was attributable to stock write-offs.

Its profit margins of 28 per cent were wiped out by a 35 per cent increase in costs as the yen soared. Both game machines and software for sale in Europe are manufactured in Japan.

Any undermining of sentiment towards computer games could affect next month's US flotation of Richard Branson's computer game publisher, Virgin Interactive Entertainment.

But Robert Devereux, chairman of VIE, said yesterday: 'Fortunately we flagged the difficulties in the European market well in our presentations. We've also planned for what is materialising. We will publish fewer titles this year and our sales figures are reasonably conservative.'

While VIE is expecting the dollars 4bn (pounds 2.7bn) global game software market to hold steady in 1994, it believes there could be a decline of up to 15 per cent in the European market. But this should be offset by growth of up to 15 per cent in the US market.

Mr Devereux said that both Nintendo and Sega clearly had had stock problems, but they were being worked through in an orderly fashion. 'It was one of the reasons Christmas was poor; there was a lot of cheap Nintendo stock around.' Nevertheless he considered the problem 'manageable over a period of time'. He said the market would be difficult in 1994, but would not collapse.

Tim Steer, an analyst at brokers Smith New Court, predicted technology would rescue the industry. 'What's happening at the moment is that there is a lull. When 32-bit technology hits in Christmas '94, it will take off again,' he said.

(Photograph omitted)