Square Enix announces 'extraordinary loss' in its next financial report, Yoichi Wada resigns

In Lightning Returns: Final Fantasy XIII, heroine Lightning has 13 days to save the world from a catastrophe - and it's starting to look like Final Fantasy publisher Square Enix may need a hero of its own following the announcement today that the company is set to post an 'extraordinary loss' - one so large that has caused the company's long-time CEO to step down.

In a newly published financial report titled "Announcement of Revisions to Consolidated Results Forecasts and Expected Extraordinary Loss," the company reveals some incredibly grim statistics of the last year at the company, and reveals the true shocking extent of recent problems. 

State of the Union
Previously, Square Enix had forecast net sales for the financial year of 150 billion Yen, but has now reduced that prediction down to 145 billion. That's not an incredible loss, but the net income loss has been increased significantly from a fairly controllable 3.5 billion to an incredible 13 billion Yen. 

[block align="right" title="Yoichi Wada" image="wada.jpg" game="0"]
[*]Wada has been CEO of Square Enix since it came to be in 2003"
[*]Will step down in June 2013, when his current term as CEO ends
[*]Has no major game development background but a rich business history
[/block]"The Company forecasts that actual business results from its Digital Entertainment Segment substantially fall below its plan primarily due to slow sales of major console game titles in North American and European markets," the report says, pinning some of the performance on game performance. The company also noted that its arcade business was experience "sluggish" performance.

The company notes in the report that Sleeping Dogs, Hitman Absolution and Tomb Raider have all experienced weak sales. Sleeping Dogs is expected to shift 1.75 million units by the end of the fiscal year, while Hitman and Tomb Raider will both move around 3.5 million units - but this isn't enough, which paints a rather grim picture for the industry and HD games at large. In particular, these titles failed to sell well in North America - two thirds of their sales were in Europe, with the report noting the "North American sales force was ineffective." 

Far worse and interesting than either of these, though, is what the company describes as an "extraordinary loss" incurred from restructuring in order to settle its accounts and balance its books this month as part of the end of the fiscal year. This makes up an incredible 10 billion yen of their losses. 

The loss is blamed on "major reforms and restructuring in its development policy, organizational structure, some business models, and others," which essentially means shuffling, cancelling and reevaluating projects already in development. 4 billion yen of this loss comes from "disposal of content" - cancelling projects - while evaluating those losses accounts for another 4 million. The final 2 billion is simply filed away as "other."

For some perspective, consider this - the 13 billion yen loss translates as a massive 137.87 million US dollars. Even inflation adjusted, the excellent Final Fantasy XII cost only $55 million to develop - $48 million at the time. Clear figures on the development cost of the more recent FF title aren't available. 

The King is Dead - Long Live the King
So bad are the results that Square Enix President Yoichi Wada is stepping up to take responsibility for the performance - and will vacate his post when his current term ends in June of this year. Wada leaving is big news, as he has been present at Square Enix since its 2003 birth, and was at Square Co. three years before that.

He was key to a number of major changes for the company, overseeing changes such as the Eidos purchase, the initial Square/Enix merge, and the major decision to reboot the failed Final Fantasy XIV. Wada is to take a 60% pay cut starting in April due to the company's poor performance. When he leaves the company he will do so completely - he will not remain on the board after stepping down as CEO.

The report from Square Enix indicates to shareholders that Yosuke Matsuda is expected to be elected into Wada's role once he leaves in June. Like Wada, Matsuda is a life-long businessman, and moved straight from university to work as a Manager at a major insurance company. All told he worked in insurance for the best part of a decade before joining Square in 1998. There he remained for a short while before moving to work for a tax consultancy firm.

In late 2001 Matsuda returned to the new Wada-helmed Square Enix in a much higher role, and has since acted as Senior Vice President, Chief Financial Officer and Director. If Matsuda takes the job, he will be taking a 40% pay cut from his current position as part of the deal. Also in contention for a top job and noted in Square Enix documentation is Square Enix Europe CEO Phil Rogers. A western name in one of the company's very top roles would be a major development, and a recommitment to Eidos and Western development.  

This story is developing, and we'll bring you more as we get it. How do you feel about this news? Let us know below.

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