Sega was one of the game industry's earliest supporters of mobile games,on the popularity of characters such as Sonic the Hedgehog to create games for mobile phones and handheld computers.
Cell phone games have become a cultural institution in Japan, Sega's home base, where millions kill time during long train commutes by whacking away at monsters or practicing their martial arts skills in games such as "Street Fighter."
Sega has 2.5 million Japanese subscribers for its mobile game and entertainment services. The company contracts its services out to cell phone carriers, which sell game packages to their customers.
Mobile games have yet to catch on in a big way in the United States, however, due to factors ranging from a comparatively underdeveloped phone system to different commuting habits.
Analysts predict that the concept will catch on around the world, however. British research firm Datamonitor predicts that 200 million U.S. and Western European customers will be playing games on mobile phones by 2005, helping to create a worldwide market with $6 billion in annual revenue.
Initial products from the new Sega division, Sega Mobile, will include a mobile version of "Super Monkey Ball," the company's popular puzzle game for Nintendo's GameCube console.
Formation of the mobile division is another step in Sega's transformation to a software-only company since itits Dreamcast game console last year.