Earlier this week, Square Enix president Yoichi Wada recognized a need for change within his company, saying to Reuters, "We need to go beyond traditional Square Enix." After a look at the game maker's fiscal year 2007 performance, it's easy to see where he was coming from.

Reporting today on its fiscal year ended March 31, 2008, Square Enix said that both revenues and earnings had dropped off significantly from the year before. Sales dropped 9.8 percent on the year to ¥147.5 billion ($1.4 billion)--a sharp contrast to last year's 31.3 percent gains, which grew revenue to ¥163.4 billion ($1.6 billion). Although Square Enix was able to curtail a precipitous slump in net income from a year ago, the publisher still posted net income down 20.9 percent to ¥9.2 billion ($89 million).

Square Enix was hit hardest in overseas markets, where sales had slipped 45.7 percent in North America, 41.1 percent in Asia, and 35.3 percent in Europe during the year. That's in sharp opposition to Wada's professed desire to expand its overseas presence to account for 80 percent of the company's sales. As part of this end, Square Enix said last year that it was actively looking for US publishing partners. In addition to confirming Dragon Quest IV, V, and VI for North America earlier this week, Square Enix dated its Xbox 360 role-playing game Infinite Undiscovery for September 2.

The usual suspects dominated Square Enix's list of games that performed well for the year. A handful of games released during its fiscal year 2007 broached the 1 million unit mark, including Dragon Quest IV for the Nintendo DS and Crisis Core - Final Fantasy VII for the PlayStation Portable. Also measuring out respectable sales were Final Fantasy IV (DS) with 590,000 units in Japan, Final Fantasy XII: Revenant Wings (DS) with 760,000 units in Japan and North America, and Dragon Quest Swords: The Masked Queen and the Tower of Mirrors (Wii) with 490,000 units in Japan and 110,000 more in North America. All said, sales of Square Enix's offline ventures were down 19 percent year over year, amounting to yen 41.6 billion ($402 million).

As for the publisher's online games, the publisher said that Final Fantasy XI had hit 500,000 paid subscribers. Online-games revenue was down 11.4 percent to ¥12 billion ($116 million), whereas mobile-phone content saw a similar drop of 15.3 percent to ¥6.6 billion ($64 million). The downturn in the arcade business dragging on Sega Sammy, Namco Bandai, and Capcom is apparently affecting Square Enix as well, with the publisher reporting a revenue fall of 8.7 percent to ¥69.1 billion ($668 million). One of the game maker's other big businesses, publications, held fairly steady for the year, dropping a mere 0.4 percent to ¥11.1 billion ($107 million), whereas the miscellaneous and sundry category rocketed skyward 126 percent to ¥9 billion ($87 million), thanks to the collectible-card game Dragon Quest Monster Battle Road, which launched in July.

Calling 2007 a "period of transition," Square Enix projected that revenues and profits will do an about-face in its 2008 financial year, which ends March 31, 2009. Laying out its future outlook today, the company expects that net sales will rebound 8.5 percent to ¥160 billion ($1.5 billion), with net income seeing a far healthier uptick of 30.5 percent to ¥12 billion ($116 million). To pull off this turnaround, the publisher said it was investing heavily into research and development, with an eye toward amping up "advanced information technologies, which are crucial to promote network-related businesses."