Nintendo raises full-year forecast

TOKYO Thu Oct 25, 2007 5:54am EDT

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TOKYO (Reuters) - Japan's Nintendo Co Ltd 7974.OS nearly tripled its first-half profit and boosted its annual earnings outlook on Thursday as its popular Wii and DS game machines outsell rival Sony Corp's (6758.T) PlayStation.

Offering quirky, easy-to-learn games and breaking new ground with motion-sensing controllers, Nintendo has expanded the gaming population to women and older people, a strategy that has helped its shares jump fivefold in two years.

Kyoto-based Nintendo raised its operating profit forecast for the year to March to a record 420 billion yen ($3.7 billion), in line with analysts' expectations, and up from an earlier estimate of 370 billion yen.

The revised forecast -- its second upward revision this year -- is 86 percent above the previous year's result and follows an increase in first-half profit to 188.8 billion yen.

Demand for the Wii has been strong since its launch late last year, easily outpacing PlayStation 3, although Microsoft Corp's MFST.O rival Xbox 360 has gained ground on its alien shooting game "Halo 3".

Nintendo is also seeing growing support from software publishers and raised its annual software sales goal by 35 percent to 97 million units.

"It's the Wii software that we are most positive about," said Hiroshi Kamide, an analyst at KBC Securities.

"That will be the key driver for Christmas and the fact they can be so punchy about forecasts like this just before Q3 means things must look great for their retailers and wholesalers. All in all, the upward (earnings) revision only tells half the story."

Nintendo will also launch a "Wii Fit" home fitness game featuring a pressure-sensitive mat that allows players to head soccer balls and imitate ski jumping.

And in a major coup, Capcom Co Ltd (9697.T) said earlier this month it would develop the latest version of its blockbuster "Monster Hunter" action game for the Wii.

The game had previously been developed for Sony's consoles and the switch to Nintendo has fed speculation that support for the PlayStation franchise may be slipping.

The contrast with Sony's game earnings is stark.

The electronics conglomerate, also announcing results on Thursday, said PlayStation 3 unit sales may fall slightly short of its 11 million target this business year. It does not expect its game division to turn a profit until next year.

Nintendo lifted its annual Wii sales target by 1 million units to 17.5 million.

Sony packed cutting-edge technology such as a Blu-Ray high-definition DVD player and the "Cell" microprocessor -- dubbed a supercomputer on a chip -- into PlayStation 3, offering lifelike graphics that appeal to hardcore gamers.

But the advanced components have driven up the price for buyers and made it difficult and time-consuming to develop software, dampening demand.

Nintendo's Wii is the cheapest of the three game consoles, selling for $249 in the United States, and both Sony and Microsoft have cut prices of their machines in response.

But Nintendo senior managing director Yoshihiro Mori said the cuts would have little impact on Nintendo.

"The way people play with the Wii and the type of games people play are quite different from rival offerings. The products are quite clearly differentiated," he told a news conference. "We don't see any need to cut prices.

Nintendo has become Japan's third-most valuable company by market value although its stock ended 3.5 percent lower at 66,400 yen after a 7.8 percent climb a day earlier.

It revised its annual net profit forecast to 275 billion yen, up 12.2 percent on its previous estimate and 58 percent higher than the previous year. It also hiked its dividend forecast for the year to 1,090 yen from 960 yen.

Annual revenue is now expected to rise 60 percent to 1.55 trillion yen.

Microsoft will also report earnings later in the day.

(Additional reporting by Yumi Horie, Nathan Layne and Kiyoshi Takenaka)

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