Feb. 1 (Bloomberg) -- Square Enix Co., Japan's second- largest game software publisher, plans to acquire companies domestically or in countries including India and China to accelerate profit growth.

``Acquisitions and alliances will be the cornerstone of our growth strategy this year and the next,'' President Yoichi Wada said in an interview today, without being more specific. ``We are an entertainment content provider, so you won't see us buying business software or food and beverage companies.''

The company last made an acquisition in 2005, when it bought Taito Corp., a Japanese arcade game maker that created the ``Space Invaders'' title. Tokyo-based Square Enix, formed in 2003 when Square Co. merged with Enix Corp., has closed unprofitable stores to help meet a goal of turning the arcade business to profit this fiscal year.

``The cycle of buying new companies, improving earnings and acquiring again comes on average every two years,'' Wada said in Tokyo. ``It's been two years since we bought Taito. I think it's time for the next round.''

Net income will rise 3.3 percent to 12 billion yen ($113 million) in the year ending March 31, the maker of the ``Final Fantasy'' and ``Dragon Quest'' games forecast in May. Sales will probably slip 0.6 percent to 162.5 billion yen, Square Enix said.

Arcade Division

Operating profit in the arcade business will reach 350 billion yen this year, compared with a loss of 351 million yen a year earlier.

The arcade division will account for half of revenue and 17 percent of the expected 21 billion yen in operating profit this fiscal year, Square Enix said in November. Game software, the company's biggest revenue earner, is expected to contribute 27 percent of sales and 43 percent of profit.

``Our net income ceiling in past few years was between 15 and 20 billion yen, and the next step is to raise it to the 20 billion yen to 25 billion yen range,'' Wada said. ``Slumping equity markets worldwide make this an opportune time for acquisitions.''

Japan's Nikkei 225 Stock Average, which has lost 12 percent this year, last month dropped to its lowest since September 2005 on concerns of a slowdown in the global economy. The S&P 500 this month fell to the lowest since September 2006.

Square Enix declined 0.7 percent to 3,030 yen at the close on the Tokyo Stock Exchange, while the benchmark Topix index declined 0.7 percent.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net.

Last Updated: February 1, 2008 02:01 EST