No Microsoft deal, Sega sez

By VARIETY STAFF

TOKYO --- Computer game maker Sega Enterprises Ltd. on Monday denied reports in a leading Japanese daily that it was going to jointly develop a 128-bit homevideo game unit with Microsoft.

The Nihon Keizai Shimbun reported Sunday that Sega would leapfrog over the 64-bit game offered by rival Nintendo Co. to produce the 128-bit game unit with Microsoft. The proposed unit would sell for about 30,000 yen ($247), the paper said.

The paper said the two companies were working out the details of the deal and planned to sign a contract later this month.

Sega declined to comment about the article, but did acknowledge it had been having discussions with Microsoft, according to Japanese press reports.

Sources at Microsoft's Redmond, Wash., headquarters confirmed discussions between the two companies, but said the meetings had to do more with software content development than with any possible gaming hardware.

Sega's 32-bit Saturn game has been taking a beating in the Japanese market at the hands of Sony's PlayStation and the 64-bit Nintendo game. Although the size of the bit stream isn't always a sign of increased speed or capacity, the new 64-bit Nintendo system is winning kudos for its graphics and sound.

The drubbing in the homevideo game market has led to tough financial times for Sega. Its domestic market share has fallen off significantly in the past three years, and its slice of North American gaming business has sagged against Sony and Nintendo.

Sega and Japanese toy maker Bandai Co. Ltd. announced merger plans earlier this year, but the deal was later called off. It also is a partner with MCA Inc. and DreamWorks SKG in the GameWorks mega-arcade chain.