(Repeats to remove extra word in paragraph 11)
* Nintendo warned of third year of operating losses after
poor Wii U sales
* Company will unveil new management strategy on Thursday
* Company announces up to $1.22 bln share buy-back after
dull Q3 results
By Sophie Knight and Reiji Murai
TOKYO, Jan 29 Nintendo Co Ltd, facing a
third year of losses, is getting lots of unsolicited advice on
how to squeeze more out of its Mario franchise and revive its
fortunes after admitting that its Wii U game console has been a
The company has given few clues on its new management
strategy, due to be announced on Thursday. One thing, however,
is certain - it will have to burn through a lot of its cash pile
in the years it takes to try again with the Wii U's successor.
The Nintendo that emerges could well be a more efficient
company - better at marketing its beloved characters, but still
wedded to its basic strategy of making hardware as the vehicle
for software developed in-house.
Most analysts do not expect a bolder change of direction,
such as making its back catalogue available via an online
subscription service or allowing its games to be played on
smartphones - despite some saying they are the future of gaming.
The Kyoto-based company has been slow to move online,
falling behind Microsoft Corp and Sony Corp,
which will launch a cloud-based streaming service this summer
enabling users to play the same game across numerous platforms.
Taking Mario to the cloud would be a big step for
"Online is big and Nintendo is notorious for not having a
great online system," said Jean Snow, a Tokyo-based gaming
The company faces no imminent existential danger. With 850
billion yen ($8.3 billion) in cash and its own shares at the end
of last September it can survive a few years of losses.
That cash pile was amassed from past hits such as the first
Wii - evidence, say some, that a company with its history of
booms and busts has the ability to turn things around once more.
"Nintendo is a special thing, because of its history, so
many gamers have a soft spot for Nintendo... they just shot
themselves in the foot with this piece of hardware, the Wii U,"
said Snow. "But I totally think they can get out."
The company on Wednesday announced it would dip into its
cash pile and buy back up to 125 billion yen ($1.22 billion) of
its shares, or up to 7.82 percent of the outstanding total.
Nintendo also said its operating profit fell 6.9 percent in the
WII U FAILURE
The failure of the Wii U - whose annual sales forecast was
slashed by 70 percent earlier this month - leaves Nintendo as
the loser of the pack now led by Sony and Microsoft.
Analysts say the Wii U foundered because too few games were
released for the console, with development issues leading to a
delay of more than six months between the games released at the
launch in November 2012 and the next batch of titles.
"There's no software that is made especially for the Wii U.
If there were fun games that you couldn't play on anything else
then that would be something to talk about," said Eiji Maeda, an
analyst at SMBC Nikko.
It was the sports and fitness games introduced with
Nintendo's previous console, the Wii, that made it a runaway hit
as their use of the console's unique motion sensor controllers
drew in families and video games newbies.
But those casual gamers have been unconvinced of the need to
upgrade to a console whose name and concept seems so close to
its predecessor, while core gamers hanker for the more adult
games, higher processing power and connectivity offered by
Sony's PlayStation 4 and Microsoft's Xbox One.
Although Nintendo CEO Satoru Iwata said that sales of the Wii
U would pick up as more titles are released, there are few cases
of a console becoming a hit after a slow start. Third party
developers are also less likely to want to make games for a
Nintendo has survived misses amid its hits before. It
weathered the blow to the games industry from the collapse of
rival Atari, scoring a hit with its Nintendo Entertainment
System, and later won a battle for dominance against Sega.
Nintendo's Gamecube console, released in 2001, stumbled
against Sony's PlayStation 2 and Microsoft's Xbox. The Wii was
initially derided for lacking the high-definition graphics of
its rivals' next-generation consoles. It went on to outsell the
Xbox 360, with more than 100 million sold by September 2013.
Nintendo budgeted a record 70 billion yen ($684 million) for
research and development this year, as increasingly
sophisticated graphics and functions has pushed the average cost
of making a game to around 2-3 billion yen.
But with the company falling short of a 100 billion yen
operating profit target set last year, Thursday's announcement
is likely to focus on cost cuts. Nintendo will report its
third-quarter results on Wednesday.
"The increase in the cost of game development is one of the
reasons why Nintendo hasn't put out (enough new) software," said
Hideki Yasuda, an analyst at Ace Securities.
Nintendo has already moved to reduce costs by merging its
portable and home game console departments last year.
Some investors doubt the move will be drastic enough, with
some clamouring for Nintendo to license its games out to other
companies and to make a mobile version for Apple's iOS
and Google Inc's Android smartphone platforms.
But the robust sales of the Playstation 4 and Xbox One
suggests the threat of smartphones to home game consoles has
been overplayed, while Nintendo has long resisted going mobile,
saying it would hurt the inherent value of its characters.
Instead, Nintendo could better exploit that value by
expanding its franchises for characters such as Mario and Zelda
as it did with Pokemon, which was spun into a successful cartoon
series, movie and toys and is now owned by an affiliate.
"They could diversify their revenue streams... rather than
licensing Mario to another game company it would be better to
make a movie or a TV series," said Yasuda of Ace Securities.
"Bandai Namco has found great success doing that with Gundam and
($1 = 102.7900 Japanese yen)
(Editing by Alex Richardson)