Skip to main content

Videogame maker

Sega

reportedly is being pursued by

Microsoft

(MSFT) - Get Microsoft Corporation (MSFT) Report

and

Electronic Arts

(ERTS)

, despite Sega's plan to link up with pinball maker

Sammy

.

Microsoft and Electronic Arts are separately looking into the possibility of buying all or part of Sega, according to a report in

The Wall Street Journal

, which cited people close to the matter. The report said the two companies have yet to hold formal talks with Sega, and that neither suitor would comment.

TheStreet Recommends

Sega has struggled for years to stem its flow of red ink, and is saddled with a grim outlook for this year. Meanwhile, the company's recently announced plan to link up with Sammy appears to be facing difficulties, the report said.

A deal with Sega could give a boost to Microsoft, which is struggling in the Japanese market against

Sony

(SNE) - Get SONY GROUP CORPORATION SPONSORED ADR Report

and

Nintendo

. Sega would add much-needed credibility to Microsoft within Japan's gaming circles. Better games that appeal to the region's audience may help the software giant bolster sales of its Xbox machine in Japan.

"I think it makes sense for Microsoft," said UBS Warburg video games analyst Michael Wallace. Microsoft "needs a presence in Japan from a hardware perspective. They

also need help with proprietary software especially in sports."

A Sega deal also would give Electronic Arts a hand in Japan, and would eliminate a competitor for Electronic Arts. Sega's Visual Concepts competes with Electronic Arts in sports games. But analysts noted that such a deal may be more complicated than a Microsoft union.

"There's a lot of duplication and it's a fairly risky ... purchase for them," said David Cole, an analyst at game research firm DFC Intelligence.

UBS's Wallace added, "There's a lot of overlap for sports ... it's a big piece of

Sega's business. For EA to spend the money and have a one-to-one overlap on sports doesn't make a lot of sense."

Nonetheless, a deal with Sega would bring a savvy group of game developers to either suitor.

In afternoon trading Friday, shares of Electronic Arts were down 0.6% at $52.52, while Microsoft's shares were up 0.7% at $23.74.