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Square Enix Financials Fall Through the Floor

| 12 May 2011 17:28
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The financial situation at Square Enix has gone from zero to train-wreck in the course of a single fiscal quarter thanks to the earthquake, tsunami and a series of surprise "extraordinary losses."

Things looked reasonably stable for Square Enix back at the start of February, when it published its Consolidated Results Forecast for the 2010 fiscal year. It wasn't going to make a lot of money, just a little over $12 million in net income, which is certainly better than nothing, but then things got ugly.

Revisions to that forecast published today paint a whole new and much uglier picture for the company's year end. The damage wrought by the earthquake and tsunami that struck Japan in March, which forced the closure and then restoration of various "amusement facilities," cost the the company roughly $7.4 million, but it's a couple of "extraordinary losses" that really stung.

"Under a rapidly changing operating environment and more prudent estimates of future cash flows, the Company plans to write down goodwill (approximately ¥8.8 billion [$100 million])," the revision says. "Further, as a result of introducing a tightened selection standard regarding title lineup to strengthen the revenue base of the Company's digital entertainment segment, project development cancellation and related losses (approximately ¥4.5 billion [$55 million]) are expected."

A few other relatively small factors also come into play, adding up to a grand total of ¥16 billion [$200 million] in extraordinary losses for the year. Put it all together and what you get, instead of the predicted $12 million income, is a loss of $148 million. As Joystiq notes, the potential long-term upside is a stronger and presumably more profitable lineup of games resulting from the "tightened selection standard" but still, man, that's gotta hurt.

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