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Another notable dissenting voice within Sega was Isao Okawa, a well known wealthy Japanese venture capitalist and philantropist, who had officially joined Sega's board of directors in June of 1997 and was now serving in the largely ceremonial role of corporate chairman. Before this, he was better known as the founder and head of CRI (CSK Research Institute), as well as his work with the Japanese government in building up Japan's high-tech business economy. CRI had been associated with Sega for many years, and Okawa had long been appalled at how badly Nakayama and his fellow executives were running things. "The bottom line is that Sega was too loose with its money," Okawa later recalled shortly before his death in 2001. "No matter what I told Nakayama, he just brushed me off, saying, 'Okawa-san, you do not know the gaming business.' What I do know is business. Nakayama may have known games, but he did not know business. As a result, Sega kept going after profit/loss and did not consider its balance sheets. They did not think about cash flow at all." Another quote by Okawa on the subject of Sega's mismanagement during this time is as follows:
The business management of Sega left me totally dumbfounded. One of the the basics of business is that you hand over the product to buyers and receive money in return. Unfortunately, our management personnel did not even seem to know this basic fact. That is why their attitude has been so nonchalant, even if Sega is accumulating debt. They have no concept of production schedules or product management on their minds. They think neither of balance sheets nor cash flow. They know a lot about games, but they do not know how to run the company.Okawa's comments do not sound all that different from what Tom Kalinske, Paul Rioux, and Shinobu Toyoda had tried to tell Nakayama back in 1995, and they chimed pefectly with what Stolar was now advocating from the West. It was the one point on which Okawa and Stolar agreed - their personal relationship was rather strained due to personality clashes - but it was enough for business purposes. Sega had run the company into the ground with the Saturn. It was time to jettison the console and move on to something else that might have a chance of making a profit while there was still a Sega left to hawk it. As a matter of fact, on 12 March 1997 a number of videogame-oriented Internet sites reported that Sega already had a successor to the Saturn in the works. It was reported under various names - Project Pluto, Saturn 2, Dural, and Black Belt. By the end of the month, rumors began to circulate across the videogame industry of a 64-bit upgrade module for the Saturn, similar to 3DO's aborted M2 plug-in, that would also double as a RAM expansion cart. Ominously enough, the name Eclipse was reported for this rumored Saturn upgrade. It seemed to industry watchers and eager gamers that Sega was exploring two distinct possibilities for the immediate future - either extending the life of the Saturn for one or two more years via a hardware upgrade, or ditching it altoghter in favor of a completely new and more powerful system. Which one would it be - or perhaps both, or neither? Thoughts of Saturn's future and Sega's seeming indecisiveness on the matter left many a Sega gamer feeling confused and disheartened as 1997 continuned to roll onward. Again, though, we are getting a bit ahead of ourselves. There is still the rest of 1997 to consider before the policies of Okawa and Stolar concerning the Saturn's future begin to bear on Sega's ailing fortunes.
With the Klinske and Toyoda comments referring to the content of th eprevious page:
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Sega would be taking a hit of US$216 million "due to problems with accumulated supplies of outdated gameplayers (i.e. 16-bit consoles and software) and losses at its U.S. subsidary." This news was as much of a shock to Sega stockholders and supporters as it was to the rest of the videogame industry, and it was now becoming obvious to many that Sega's public relations department was going to have to lay down a lot of smoke to cover the damage - if they could at all. Interestingly enough, that figure - US$216 million - also happened to coincide with the net total of operating losses incurred by Sega of America over the Saturn to date, as reported earlier by Sega managing director Shunichi Nakamaura back at the end of 1996.
Which seems to imply that the "losses to old inventories" may have been a coverup for Saturn losses...
