* Strong yen, weak sales hit profit
* To launch Wii U console in major markets at year-end
* Cuts unit sales forecasts for consoles, handheld devices
* Slashes FY fcast to 45 bln yen loss vs consensus 4.2 bln
By Yoshiyuki Osada and Isabel Reynolds
Jan 26 Nintendo Co Ltd posted a sharp drop
in quarterly profit and forecast a bigger-than-expected
full-year loss, its first at an operating level, as it battles a
strong yen and its games devices lose ground to gadgets such as
The creator of the Super Mario franchise dominated the video
games industry for years with its DS handheld players and Wii
home consoles, but is now struggling to keep up as more
versatile smartphone and tablet sales boom.
"To say that (the days of consoles) are over is likely an
overstatement, but social network and Internet delivered games
are growing and structurally changing the future of the
industry, which is a strong wind against Nintendo," said Shigeo
Sugawara, senior investment manager at Sompo Japan Nipponkoa
Nintendo now expects an annual operating loss of
45 billion yen ($575 million), dwarfing expectations of a 4.2
billion yen loss, based on the average of 21 analyst forecasts.
"Their time of growth (from consoles) is over, and, while I
don't think the company will cease to exist, if they don't move
into new categories, they will no doubt lose the great scale
they've amassed," said Mitsushige Akino, chief fund manager at
Ichiyoshi Investment Management in Tokyo. `
Nintendo cut its forecast for annual sales of its ageing Wii
console to 10 million devices from 12 million, and for the 3DS
handheld games device to 14 million from 16 million.
"We had higher expectations for the year-end season, but
failed to meet them," President Satoru Iwata told reporters in
Poor sales forced Nintendo to slash the price of its
much-anticipated 3DS handheld games device in August, just six
months after its launch.
The move halted its record of making profits on games
hardware as well as software, a business model that took
operating income to a high of 555 billion yen in 2008/09.
Nintendo also faces tougher competition in the home console
market from Sony Corp's Move and Microsoft Corp's
Kinect, and Iwata said consumers were more eager than
ever to seek out bargains in the harsh economic environment.
The company plans to launch the Wii's successor, the Wii U,
in Japan, the United States, Europe and Australia in the
year-end season, Iwata told reporters.
But with cloud-based gaming emerging as a potential threat,
Nintendo may have trouble generating excitement about its new
product, some analysts say. Google is taking steps into
gaming with Google TV, while Apple is thought to be
preparing a new iPad and possibly a smart TV that could be
game-changers for the industry.
"We think we need to consider the possibility that home
consoles could become a thing of the past," Citigroup analyst
Soichiro Fukuda wrote in a recent report.
"We think the direction taken by marketing trendsetter Apple
will be very important and we will be watching the company's
announcements at future events with interest."
Nintendo's profit slumped to 40.9 billion yen for the
traditionally strong October-December period, compared with a
consensus estimate for 52 billion yen, based on a survey of
three analysts by Thomson Reuters I/B/E/S.
The results came a day after Apple blew away Wall Street's
expectations with its own quarterly earnings.
Shares in Nintendo have halved to below 11,000 yen since the
beginning of the financial year in April, hit by weak 3DS sales
and market disappointment with the Wii U next-generation home
console, unveiled at the E3 games show in June and set to go on
sale late this year. At their peak, in late 2007, the shares
traded at 73,200 yen.
Last week, the stock dipped to 10,020 yen, the lowest since
April 2004, before either the DS or Wii were launched.