It wasn't as much competition from Sony, Microsoft, Nintendo or even all the money they lost on the Saturn and Dreamcast as much as it was SEGA's chairman who wanted SEGA to be a software-only company going all the way back to 1997.
I first herd about it in this really recent interview with Bernie Stolar (former SEGA president) who said:
|“When [former Sega President Hayao] Nakayama was pushed out and when I was pushed out, I think what took place was, Mr. [Isao] Okawa, who then became the chairman of the company -- he was an investment banker from CSK [Holdings Corporation].... I don’t believe he was committed to the hardware. He just believed it should be a software company.”|
I later found some quotes of his in a The New York Times article:
|In a recent interview with the Yomiuri Shimbun, Mr. Okawa said the company was likely to abandon the hardware business altogether. ''I have worked in software all my life, and I feel uncomfortable being in the hardware business,'' he told the newspaper. ''In fact, when I became chairman of Sega in 1997, I said we should stop producing hardware.''|
I also found these quotes on The Register who got them from GamerIntelligence:
|"I will say that the future doesn't necessarily lie in the hardware business," said Okawa. "I think in the future there is the possibility of Sega becoming a software-only company... "Even if Dreamcast does sell, we will make that shift."|