Shortly after launch of the SG-1000, Gulf and Western began, the parent company of Sega, decided to divest itself of its non-core businesses after the death of company founder Charles Bluhdorn. Hayao Nakayama and former Sega CEO David Rosen arranged a management buyout of the Japanese subsidiary in 1984 with financial backing from CSK Corporation, a prominent Japanese software company. Nakayama was then installed as CEO of the new Sega Enterprises, Ltd. Following the buyout, Sega decided to update the SG-1000 with the release of the SG-1000 II.
On July 31, 1984, Sega released the SG-1000 II. The difference between it and the SG-1000 were mostly cosmetic. The new model featured two detachable joypads instead of the hardwired joysticks. The SG-1000 II controller (SJ-150) was also slightly updated and could now be housed on the sides of the console, a design concept inspired by Nintendo’s Famicom. Finally, the expansion port was moved to the front of the unit.
Ultimately, even if with a great game catalogue, the SG-1000 II was not able to compete with the Nintendo Famicom which was more powerful. Sega realized that they would need a serious hardware upgrade and not just cosmetic change to become a serious contender to the Famicom. With this in mind, Sega worked on developing their new console, the Mark III (also known as the Master System).