Capcom Lowers Expectations On Tax, Western Sales Issues

Officials from Japanese-headquartered publisher and developer Capcom have released revised details of the company’s forecast for the fiscal year ending March 31, 2006, citing both Japanese tax issues and sluggish sales of unspecified Capcom titles in the West. This revised report indicates a 27 percent decline in net income from the company's initial earnings forecast for April 1, 2005 to March 31, 2006. Capcom has lowered expectations for its consolidated gross profit to ¥6.4 billion ($54.4 m), compared to ¥7.4 billion ($62.8 m) previously reported. As a result, consolidated net profit has been lowered as well, from ¥8.9 billion ($75.6 m) to ¥6.5 billion ($55.2 m). Capcom explained that this revision primarily stems from a notice of tax audit of ¥1.7 billion ($14.4 m) given to the company by the Osaka Regional Tax Bureau for March 2000 through March 2005, during which time the Bureau claims that Capcom failed to report ¥5.1 billion ($43.3 m) in taxable income. Capcom has stated that it disagrees with the Bureau's findings, and plans to file an appeal with the regional tax authorities. 　　However, in addition, a decrease from the earlier profit projections is expected due to what Capcom described as "poor performance of the North America home video games industry and weak sales of a number of titles in Europe", perhaps another indication of the tough market for current-gen console titles over 2005's holiday season.