Sega fires missile at competitor as video games war hots up

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The Independent Online
Away from the small screens where children are slugging it out with Super Mario to beat their best friend's record, a mightier, mega-bucks battle is being fought out.

In a bid to stay in the game, the computer games giant Sega announced yesterday that it is to buy Japan's largest toymaker, Bandai Co, for $1.09bn (pounds 653m).

The acquisition of Bandai's stable of characters, which includes the Power Ranger line, is likely to boost Sega's standing in the increasingly competitive - and lucrative - world video games market. The new company, Sega Bandai, will be formed in October . At twice the size of Nintendo, it will be among Japan's biggest entertainment companies.

Sega has been lagging behind its main rivals, Nintendo and Sony, for some time. Nintendo pulled ahead on the technology front with its 64-bit player which is able to play more realistic and faster games. The player, which has grabbed 60 per cent of the American market, will be released in Britain on 1 March.

At present, Sony's PlayStation is leading the field in Britain. Christmas was dominated by the 32-bit CD-Rom player, with its PlayStation games Fifa 97 for football fans and Die Hard, based on the Bruce Willis films.

Eleven million PlayStations have been snapped up in just two years, and recent defections by game makers from Nintendo and Sega to Sony are likely to mean a barrage of new games to keep the Playstation selling.

In contrast, Sega has sold a mere seven million of its 32-bit Saturn machines since releasing them more than two years ago. Last month the company lowered its profit forecast for the year to March after its US affiliate wrote off $61m (pounds 37m) of outdated 16-bit machines which never sold.

In addition to capitalising on its newly-acquired toy characters, which also include Ultraman and Dragonball, Sega's comeback will be helped by Bandai's video game designers. Furthermore, Bandai has a joint venture with America's Mattel Inc, which manufactures and markets Barbie dolls and Disney characters.

Both Bandai and Sega have been developing products for the Internet, which could help them gain ground on Sony and Nintendo if the worldwide computer network becomes the focus of the game industry.

Analysts have mixed opinions about Sega's latest move. "Bandai's got well-known characters and know-how in marketing them," said Akira Namekawa, an analyst at Yamaichi Securities. "Sega has hardware and software technology." The ages of the companies' audiences are a good match too, he added. Bandai is popular among children and Sega well-known by teenagers and young adults.

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