SEGA is set to shut down its European game development operations in order to focus on smaller scale 'digital only' titles, according to reports on the eve of the E3 gaming expo.
The former hardware giant's efforts to reinvent itself as a console game developer could run aground in the next couple of months, paving the way for mobile and tablet-only titles.
French site Gamekyo says: "On the eve of E3 2012, we are able to inform you, according to our credible sources, that Sega Europe will be finally closed in the coming months as well as all the local branches in Europe like Sega France, This is partly a consequence of the ineffectiveness of Sega's strategy over the past several years of developing games by western developers.
"At the same time, Sega will also announce, according to these sources, they will no longer develop AAA games on consoles, but will focus on digital games, notably for cell phones and tablets."
The departure of the Sonic developer from the AAA console scene would certainly pull at the heartstrings, given its lineage in the early history of video games consoles, through beloved devices like the Megadrive and Master System.
Sega's last big budget title is likely to be announced at E3 in the coming days, says the report.
We're on the ground in Los Angeles and will be bringing you all of the news from the gaming world's biggest event of the year.