January 31, 2019 / 7:16 AM / 7 months ago

Japan's Nintendo slashes Switch hardware forecast after bumper third quarter

TOKYO/OSAKA, Japan (Reuters) - Japan’s Nintendo Co Ltd on Thursday slashed its full-year hardware forecast for the hybrid home-portable Switch console, revising a figure that had been treated with scepticism by investors and added to pressure on its share price.

Banners of Nintendo's new game console Switch are pictured at its experience venue in Tokyo, Japan January 13, 2017. REUTERS/Kim Kyung-Hoon

The Kyoto-based gaming company said it expected to sell 17 million Switch consoles in the year ending March from 20 million previously and also cut the forecast for its aging 3DS handheld, underscoring the need to find other sources of revenue.

“We didn’t work hard enough to convince customers of the Switch’s appeal,” Chief Executive Shuntaro Furukawa said at an earnings briefing.

At the same time, Nintendo smashed profit estimates for its October-December quarter and upgraded its Switch software forecast to 110 million units from 100 million previously, announcing that hit titles “Super Smash Bros. Ultimate” and “Pokemon: Let’s Go” have shifted over 10 million copies each.

Operating profit for October-December was 158.6 billion yen ($1.46 billion), the highest in nine years and the second consecutive third-quarter rise. That was well above the 149 billion yen average of 11 analyst estimates compiled by Refinitiv.

Nintendo shares lost 29 percent of their value last year as investors questioned the Switch’s ability to appeal beyond hardcore gamers and the strength of the games pipeline. However, renewed enthusiasm following reports of strong demand for Switch software has helped lift the stock 16 percent this year.

The stock closed up 2 percent ahead of the earnings.

Nintendo said it sold 14.5 million Switch consoles in the April-December period along with 94.6 million software units.

UPWARDLY MOBILE

Meanwhile, Nintendo is pushing into mobile gaming but is yet to score a major hit. Role-playing game “Dragalia Lost”, developed with CyberAgent Inc, got off to a strong start supported by heavy ad spending but is underperforming expectations, CyberAgent CEO Susumu Fujita said on Wednesday.

And gamers hoping to play smartphone games featuring popular Nintendo characters face a longer wait after the firm pushed the release date of “Mario Kart Tour” to the summer from earlier in the year.

That delay means Nintendo will miss its target of releasing two to three mobile titles each financial year, though CEO Furukawa said there was no change to that goal.

Nintendo also cut its sales forecast for its 3DS device to 2.6 million units from 4 million previously.

The need to offset the fall-off in 3DS sales has led to speculation Nintendo will release another device such as a cut-price Switch.

“While it’s true demand fell more than we expected, for children playing for the first time the 3DS is light and has an advantage in price terms,” Furukawa said.

“We want to continue with both the 3DS and the Switch,” he said.

($1 = 108.7700 yen)

Reporting by Sam Nussey in Tokyo and Yoshiyasu Shida in Osaka; Editing by Christopher Cushing

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