CEO Interview
Results for Fiscal Year Ended March 31, 2009

May 26, 2009

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The first consolidated financial results since implementing a pure holding company system in October 2009 show a decline in revenues and profits for the fiscal year ended March 2009. However, there was positive news for the Group's global strategy as soon as the company entered this new fiscal year, with the acquisition of the major UK game developer and publisher, Eidos Ltd., as a wholly-owned subsidiary. Our interview with the Group President Yoichi Wada will focus this time not only on the financial results, but also on the Square Enix Group's strategy in its aim to become one of the top 10 players in the world media and entertainment industry.

Results for fiscal year ended March 31, 2009
Tough Times for Games and Amusement Segments, Publication, Mobile Phone Content, and Other Segments Doing Well

To begin with, the decline in revenues and profits seen in the year to March 31, 2008 unfortunately continued throughout the fiscal year ended March 31, 2009. How would you evaluate this situation?

Wada

In a word: regret. The results for the Games (Offline) was dismal. A major cause was the rescheduling of the release of DRAGON QUEST® IX: HOSHIZORA NO MAMORIBITO for 11 July in the current fiscal year. The fact that the delay in the release of a single title had such a huge impact on our revenues is a serious problem we need to address. One of the root causes is the problems we have had in the progress in our development process reforms. These problems cannot be solved without a change in our corporate culture, and we think that will take some time.
The TAITO-operated Amusement segment has continued to face difficult circumstances. We have seen a dramatic fall in sales since last autumn, and even when we do our best to support the business, the owners of the amusement facilities are unable to raise the necessary capital, so profitability is down as sales of even the most popular arcade game machines have been hit hard. Furthermore, we are still faced with the indirect effects of the decline in the "consumer mentality" that has been apparent since the start of the global financial downturn.

In the Games segment, DRAGON QUEST V:Hand of the Heavenly BrideTM, for the Nintendo DS® shipped a total of 1.36 million units to Japan, North America and Europe.

Wada

FY2009 Results and FY2010 Projections - Consolidated

Yes, some areas have done well, but overall it has been a difficult period. The full-year result for games sales worldwide was 11.06 million units, which is 3.35 million units down on the previous year. So, net sales of 36.3 billion yen is a drop of 12.6% on the previous year, and operating income of 4.1 billion yen is a 53.1% decline.
The Amusement segment moved out of the red and has continued to grow as we planned over the past three years, but sales for last year were down 15.7% on the previous year, at 58.2 billion yen, which, together with around 1.1 billion yen for amortization of goodwill, left us in the doldrums with an operating loss of 944 million yen. If you take just the first half, we maintained our position of having the highest sales growth rate in the industry for existing stores, which is a significant achievement when the entire industry is struggling, but the slump in the second half was what hit the hardest.

The Games (offline) and Amusement segments had a tough time, but Publication, Mobile Phone Content, and Others managed to increase revenue even in the midst of the recession.

Wada

The Publication and Mobile Phone Content segments made good progress, just as in the previous year. In particular, the positive growth cycle in the Publication segment has continued. Sales of comic books derived from our periodical magazine have been boosted by the animated TV series, so our cross-media strategy is working well. SOUL EATER and KUROSHITSUJI are especially highly rated, and sales of comic books have in some cases doubled or tripled after becoming TV animations. As a result, we had record net sales of 12.9 billion yen, up 16.4% on the previous year, and even though operating profit has dropped 2.4%, we still recorded our second-highest operating profit of 3.5 billion yen, and these figures are very encouraging.

The Mobile Phone Content segment, with its portal services such as DRAGON QUEST MOBILE and FINAL FANTASY® MOBILE, continued to do well, and the new contents, such as FINAL FANTASY IV: THE AFTER YEARSTM, have made a considerable contribution to revenues. Net sales of 7 billion yen are up7.8% on the previous year, and a 109.7% increase in operating income at 3.6 billion yen. The significant point here is that the operating profit of the Mobile Phone Content segment sustained a healthy rate of 52% over the full year. This may be a little high, but it has given us extra resources to explore the overseas market which we have not yet dealt with.

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