Nintendo faces end of era after 3DS flop

TOKYO Tue Sep 13, 2011 6:46am EDT

1 of 4. Nintendo President Satoru Iwata speaks during the Nintendo 3DS Conference 2011 in Tokyo September 13, 2011.

Credit: Reuters/Toru Hanai

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TOKYO (Reuters) - Nintendo's attempt to rescue its failed 3DS handheld games gadget failed to dispel market gloom, triggering a 5 percent share slide and stoking deep worries for an iconic brand desperate to win back users.

On Tuesday, President Satoru Iwata introduced what he said was an unprecedented range of games, aimed at attracting everyone from hardcore gamers to fashion-conscious girls and fans of the long-running Mario series.

The Japanese company also announced on its website a new 1,500 yen ($19) slidepad accessory needed for certain games.

But analysts and investors dismissed the line-up as lackluster and largely irrelevant in the face of cheap or free games played on the likes of Apple's iPhone and iPad and Google-powered Android devices.

Nintendo has been criticized for sticking rigidly to its own hardware, meaning it has no access to the new generation of mobile devices.

"I don't think the new games will make any difference," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment.

"Nintendo succeeded by pulling in people who weren't gamers and their needs now are no longer being filled by Nintendo, they are happy playing games on their mobile phones," he said.

Nintendo's shares ended 5 percent lower in a strong market. The Kyoto-based company's shares have plunged nearly 50 percent so far this year, hit by the 3DS flop and doubts that it can replicate the success of its Wii home console with the next generation WiiU, announced at the E3 games show in June.

Nintendo, which means "Leave luck to heaven," was forced to announce price cuts of up to 40 percent in July to try to boost slumping demand for the glasses-free 3D version of the DS, but this only temporarily spurred sales.

In July, Nintendo slashed its outlook for the business year to end-March to its lowest in 27 years as it braced for losses from the 3D gadget and a stronger yen.

In a subdued Tokyo conference hall on Tuesday, an appearance by the company's star game designer, Shigeru Miyamoto, wielding a toy sword and shield raised a laugh, but a series of 3DS game images depicting Miyamoto and Iwata as a pair of young lovers was met with silence.

LINE-UP OF GAMES

"From the end of this year to the beginning of next, we are planning the kind of extensive line-up that has probably never been seen before in the history of video games," Iwata told reporters and guests.

"We will make an all-out effort to see that the 3DS sells enough to become the successor to the DS," Iwata said.

That will be no easy task, given that earlier models of the DS had sold a cumulative total of about 148 million units by the end of June this year. The gadget, along with the motion-controlled Wii home console, enabled Nintendo to dominate the industry for years.

In Japan, 3DS sales leaped to more than 200,000 units in the week of the price cut, but swiftly fell back to about 55,000 units, according to research firm Enterbrain.

That leaves only the secretive company's famed content, never made available on other firms' hardware, to revive sales.

"The only possible way for Nintendo to revive would be to stop concentrating on mobile games and switch to Wii-type games for the whole family," said Makoto Kikuchi, CEO of Myojo Asset Management. "However, at the moment, I can't see this change coming."

Iwata took a 50 percent pay cut, and other executives took 20-30 percent cuts to take responsibility for the poor performance.

Analysts have cut their full-year operating profit forecasts for Nintendo by an average of 45 percent in the past 30 days and the stock is now trading at 45 times its estimated forward 12-month earnings, according to Thomson Reuters data.

Shares in software provider Capcom slumped by 8.3 percent after the company said it would be developing the next generation of its hit Monster Hunter game for the 3DS.

Nintendo slashed the price of the 3DS after sales shriveled to just 710,000 units in April-June from 3.6 million in the first month after its launch, and a tiny fraction of the 16 million unit target for the year.

Macquarie Securities analyst David Gibson said he still expected the 3DS gadget to sell about 14.5 million units over the year. ($1 = 77.000 Japanese Yen)

(Additional reporting by Tim Kelly and Natalia Konstantinovskaya; Editing by Joseph Radford and Anshuman Daga)

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Comments (11)
ceige wrote:
Wait – so a 5% fall in shares signifies the end of an era, and the 3DS is a flop?
The 3DS is getting Monster Hunter 4 (as revealed by this conference). If that goes to plan, I can assure you that’s not a flop, at least not in Japan where Monster Hunter contributed to the overwhelming success of the PSP there. Overall, this article is a mixture of biased and speculative – both of which aren’t necessarily bad, but when you’ve put them together like you have, you end up making tall claims. Not to mention that you’ve claimed that it was a failure on the day of the conference, without taking into account the possibility for long term affects.

I’m sorry, but I can’t take this article seriously. Too much reliance on biased interpretation of speculation based on short term conditions in the market.

Sep 13, 2011 9:18am EDT  --  Report as abuse
FoxxDrake wrote:
Has anyone played games on these devices? They’re not that good when compared to other game delivery systems. If your a serious gamer you want a console; either the X-Box 360 or the PS3. The Wii is for the general public – you know so grandma can casually join in the reindeer games.

For “portable” gaming; these appliances don’t compare to what else is available particularly when they offer greater functionality for basically the same price; such as an I-Pad, Tablet or Laptop.

PC gaming, while still, around is fading fast. The amount of money needed to invest in a “high-end” PC (RAM, Processor, Video-Card and cooling system) can run anywhere from 5000-15,000 dollars. Then it’s obsolete in two-three years (with upgrades extending the life at great cost).

A console like the X-Box 360 has a longer shelf-life, no DRM, plays all the high end titles and over-all is a better value.

If you need to “game” on the go; the utility of a smart-phone, I-Pad or whatnot, that plays games (good ones too) but also makes phone calls, does E-mail, surf’s the Web, etc…makes a $300 Portable Gaming System, well…stupid.

Sep 13, 2011 4:25pm EDT  --  Report as abuse
heffjos wrote:
Ceige it seems as if you either did not read the full article or just did not absorb all the facts. For instance:

1.) Nintendo was forced to cut the price of the 3DS by 40% in July which only spurred sales.
2.) Nintendo slashed its outlook to the lowest in 27 years.
3.) Iwata, the president of Nintendo took a 50% paycut while other executives took 20-30 percent paycuts for poor performance.
4.) Analysts cut profit forecasts for Nintendo by an average of 45% (this is definitely speculative, but that is a huge average)

Also, the 5% share cut was in response to Nintendo’s conference showing a lack in confidence for Nintendo’s future. I do agree with you that it does not signify an end of an era, but it most certainly signifies a decline.

Sep 13, 2011 5:56pm EDT  --  Report as abuse
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