Tokyo, Feb. 13 (Bloomberg) -- Sega Corp., the maker of ``Sonic the Hedgehog'' video game, said it will merge with Sammy Corp. a maker of pachinko games in October.

Sammy President Hajime Satomi will lead the merged company, they said in a release. The companies will hold a briefing with media on their plans at 4:30 p.m. local time.

Sega also slashed its net income profit for its current business year ending March 31.

The gamemaker now expects net income of 500 million yen, 90 percent lower than its earlier forecast. It trimmed its sales forecast by 2.5 percent to 195 billion yen.

Shares of the companies were suspended from trading at 3:48 p.m.

Thu February 13, 2003 02:53 AM ET
TOKYO, Feb 13 (Reuters) - Japanese game maker Sega Corp 7964.T and pachinko slot machine maker Sammy Corp 6426.T said on Thursday they had agreed to merge their operations on October 1 in a bid to form a comprehensive entertainment firm.

The tie-up would bring together Japan's largest maker of pachinko machines with Sega, Japan's largest game arcade operator and also creator of videogame character Sonic the Hedgehog.

The companies gave no details about how the merger would be carried out but said that Sammy President Hajime Satomi would head the new firm.

"By combining both companies' technological and developmental abilities, Sammy's high growth power and Sega's global brand power, we will be able...to address the needs of a large range of global customers spanning a wide age range," the two firms said in a statement.

After pulling out of the game console business in 2001, Sega has been struggling in its efforts to become the global leading game publisher, pulled down by its performance in North America.

In a separate announcement on Thursday, Sega slashed its group net profit forecast for the year to March to 500 million yen ($4.12 million) from a previous forecast of five billion yen, citing poor games sales in the United States.

The earnings revision was largely due to poor U.S. sales of "Sega Sports NFL 2K3", an American football simulation game released in August.

The Tokyo-based company has been shifting its focus to software development in consumer games since pulling the plug on its loss-making Dreamcast game console early in 2001 in the face of stiff competition.

U.S. sales of the football game were a major disappointment for Sega, prompting its top management to declare "total defeat" to its U.S. rival Electronic Arts Inc ERTS.O and its American football game "Madden NFL 2003".

Sales of another sports game, "NBA2K3", recently launched in the United States were also lower than its original estimate.

Sega said it had decided to postpone the domestic launch of two major game titles for Sony's PlayStation 2 console -- originally planned in March -- to some time after April, which would also drag down its earnings for this business year.

The announcement came after the close of Thursday trading. Earlier, shares in Sega ended up 1.81 percent at 901 yen, while Sammy closed up 1.86 percent at 2,470 yen. The Nikkei average .N225 was down 0.74 percent.