July 30, 2008 / 7:10 AM / 11 years ago

Nintendo Q1 profit up 32 pct on Wii; DS sales dip

TOKYO (Reuters) - Nintendo Co Ltd’s 7974.OS quarterly profit rose 31.5 percent on the runaway success of its Wii game console, but the Japanese video game maker kept its annual outlook well short of market expectations.

A woman demonstrates an interactive hula hoop game on Nintendo's Wii Fit, a new interactive fitness game for Wii system, during the product launch in New York, May 19, 2008. REUTERS/Shannon Stapleton

In contrast to white-hot demand for the Wii, sales of its DS portable player dipped in the latest quarter, underlining slowing momentum for one of Nintendo’s twin growth engines.

Since its debut in late 2004, the DS has sold 77.5 million units worldwide, with its demand driven by popular software titles including “Brain Age” and “Nintendogs”.

“This will probably set the stage for the launch of a new DS model. But until the new machine is unveiled, Nintendo’s share price could come under pressure,” said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management, referring to the fall in DS sales.

The Wii, launched in late 2006, continued to enjoy strong demand worldwide thanks to its easy-to-learn motion-sensing controller, low price and innovative titles such as the “Wii Fit” exercise game.

It outsold Sony Corp’s (6758.T) PlayStation 3 and Microsoft Corp’s (MSFT.O) Xbox 360, putting Nintendo in the leading position in a three-way game console battle.

April-June operating profit at Nintendo, creator of iconic game characters such as Mario and Zelda, rose to 119.19 billion yen ($1.10 billion) from 90.63 billion yen a year earlier.

Net profit rose 33.7 percent to 107.27 billion yen on sales of 423.38 billion yen, up 24.4 percent.

Unlike many other industry sectors, the video game market has been little affected by economic slowdown, soaring oil prices and sluggish consumer spending, and industry executives hope that demand will hold strong through the critical holiday season.

The video game industry is forecast to reach $57 billion in revenues this year, according to research firm DFC Intelligence.

DS SLOWDOWN

Sales of the Wii jumped 51 percent to 5.17 million units in the latest quarter, far outpacing PS3 sales of 1.56 million units and Xbox 360 shipments of 1.3 million units during the same period.

Since the November 2006 launches of the Wii and PS3, shares in Nintendo have more than doubled while Sony shares lost 12 percent. At $76 billion, Nintendo’s market value is now twice as big as Sony’s.

Nintendo, however, saw sales of its DS game machine ease to 6.94 million units in April-June from 6.98 million a year earlier.

Sony sold 3.72 million units of its PlayStation Portable handheld machine in April-June.

For the year to March, Nintendo kept its operating profit forecast of 530 billion yen, up 8.8 percent on the year, but below a consensus of 597.1 billion yen in a poll of 20 analysts by Reuters Estimates.

In a move to further stir up Wii demand, Nintendo earlier this month unveiled “Wii Music”, which lets players simulate more than 60 different instruments, taking itself into the fast-growing software segment pioneered by Activision Blizzard’s ATVID.O “Guitar Hero”.

Ahead of the results, shares in Nintendo closed up 3.6 percent at 57,600 yen, outperforming the benchmark Nikkei average .N225, which rose 1.6 percent.

The stock lost 16.9 percent this year through Tuesday, while the Nikkei slid 14 percent.

Reporting by Kiyoshi Takenaka, editing by Ian Geoghegan

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