Square Enix 2005 Annual Report Download - page 21

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Annual Report 2005
6. Risk Factors
Changes to the Economic Environment
A marked downturn in the economic situation that would
cause consumers to reduce spending could lead to a
decrease in demand for our firms’ products and services in
the entertainment field, and there is a possibility that this
could affect the Group’s performance.
Ability to Adapt to Changes
If the Company cannot adapt appropriately and timely to
changes in customer preferences in the digital contents
market and rapid technical advances (mentioned in
Strategic Outlook, Issues Facing Management and Future
Direction), then there is a possibility that this could affect
the Group’s performance.
New Platforms
There is a possibility that our Group, in particularly our
home-use game software business may be affected by the
release of new platforms (game consoles) and manufacturers’
strategies. When new platforms are about to be released,
there is a tendency for consumers to avoid purchasing new
games, and there is a possibility that the accompanying
reduction in sales could affect the Group’s performance.
Securing Personnel
The Group continues to grow its business at a rapid rate
and achieve growth. If we are not able to appropriately and
timely develop the personnel required to carry out the
Company’s growth strategy—centered around developing
new contents and services as well as expansion overseas—
then there is a possibility that this could affect the
Group’s performance.
International Business Expansion
In Games (Offline), Games (Online) and Mobile Phone
Content business segments, the Group is expanding its
business internationally. However, there is a possibility that
the market trends, political/economic situation, laws, cul-
ture, religion and customs, etc., of these countries could
affect the Group’s performance.
Exchange Rate Risk
The Company has established overseas consolidated sub-
sidiaries in the United States, Europe and China. Local cur-
rency that these subsidiaries have earned is mainly used for
settlements in that country or turned to local investment,
and actual exchange rate risk is reduced. However, sales,
costs and assets, etc., for overseas consolidated sub-
sidiaries operating in foreign currencies are converted to
yen when preparing consolidated financial statements. If
the exchange rate at time of conversion has moved out of
the expected band, then there is a possibility that this could
affect the Group’s performance.
Sales of Used Game Software
When our games are sold as used items, no profit is
returned to us. Accordingly, if the market for used games
increases this may lead to a decrease in sales of our games,
and there is a possibility that this could affect the
Group’s performance.