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Layoffs Drive Square Enix To Lower Profit Forecast

Layoffs Drive Square Enix To Lower Profit Forecast

October 29, 2009 | By Chris Remo

October 29, 2009 | By Chris Remo
More: Console/PC

Square Enix has significantly adjusted its 2010 fiscal year financial forecast, lowering its projected profit due to a variety of factors including an unfavorable exchange rate and the cost of severance for a series of layoffs.

The company sustained "extraordinary loss" on "premium severance payments" it made to laid off employees of its primary subsidiary Square Enix Co. Ltd. and developer Taito Corporation. In particular, the expense was due to necessary "career change support programs."

Projections that were originally made in August were lowered for both the now completed first fiscal half, which ended September 30, 2009, and the fiscal year, which ends March 31, 2010.

The actuals for first-half profit were dropped a considerable 65 percent to 2.6 billion yen (US$28.4 million), while the forecast for full-year profit lowered only 33 percent to 10 billion yen (US$109.4 million).

In real terms, 98 percent of the drop is projected to occur in the first half, suggesting Square Enix is absorbing the severance payments into that period. Although no specific guidance for the second half was given, it is likely to be significantly less dramatically affected, especially since Final Fantasy XIII launches in PlayStation 3 in Japan on December 17th.

In addition to the exchange rate and impact of layoffs, Square Enix cited vaguer "special factors," including acquisition costs, as contributing to the revision.

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