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Square Enix Warns Of Massive Expected Loss

Square Enix Warns Of Massive Expected Loss

May 12, 2011 | By Kyle Orland

Square Enix Holdings announced today that it expects to post a ¥12 billion ($148 million) loss for the fiscal year that ended in March, a stark turnaround from a February internal prediction of a ¥1 billion ($12.4 million) profit.

In a revision note issued Thursday, the company said it plans an ¥8.8 billion ($109 million) goodwill writedown, citing "a rapidly changing operating environment and more prudent estimates of future cash flows."

Also contributing to the downgrade are expected losses of ¥4.5 billion ($55.7 million) attributed to a "tightened selection standard regarding title lineup [and] project development cancellation."

Damage to Japanese amusement centers operated by Square Enix caused another ¥600 million ($7.4 million) in previously unanticipated losses, with changing account standards, asset retirement and other factors contributing to the remainder of the expected loss.

Despite the new, more pessimistic outlook, Square Enix still expected to bring in ¥125 billion ($1.55 billion) in sales revenue for the fiscal year, largely in line with previous expectations of ¥130 billion ($1.6 billion) in revenue for the year. Both numbers are down from over ¥192 billion ($2.38 billion) in revenue for the 2010 fiscal year, however.

Square Enix saw over ¥9.5 billion ($117.6 million) in profits in the 2010 fiscal year, a record result led by multimillion sellers including Final Fantasy XIII.

Profits for the first three quarters of the 2011 fiscal year were down 77 percent from that high mark, a result president Yoichi Wada attributed to "intensifying competition in the console game market."

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