April 26, 2018 / 7:25 AM / 7 months ago

Nintendo switches president after forecasting best annual profit in nine years

TOKYO/OSAKA (Reuters) - Japan’s Nintendo Co Ltd (7974.T) announced a new president on Thursday and said it expects annual profit to reach a nine-year high, as its Switch games console maintains sales momentum in its second year.

Logos of Nintendo Switch game console are seen at an electronics store in Tokyo, Japan March 3, 2017. REUTERS/Toru Hanai

The initial success of the hybrid home-portable Switch has boosted Nintendo’s gaming software sales and encouraged more third-party publishers to make games for the console, a cycle analysts expect to further push up console sales.

The strong sales has fueled investor hopes of the Switch repeating the success of Nintendo’s first Wii console, leading to a doubling of the firm’s stock price to nine-year highs earlier this year.

On Thursday, the Kyoto-based firm said it had named Shuntaro Furukawa - a 46-year-old managing executive officer in charge of global marketing and corporate planning - as president effective June to rejuvenate top management.

“My top priority is to keep and expand the momentum for the Switch,” Furukawa said at an earnings briefing.

Incumbent chief Tatsumi Kimishima - a 68-year-old former banker who assumed the role after the death of predecessor Satoru Iwata in 2015 - decided to step down as he is “close to fulfilling responsibilities” to revive the firm, he said at the briefing.

Nintendo estimated operating profit for the year through March to rise 26.7 percent from a year prior to 225 billion yen ($2.06 billion). If achieved, it would be Nintendo’s highest profit since the year ended March 2010.

The outlook, however, missed the 308.72 billion yen average of 21 analyst estimates in a survey by Thomson Reuters I/B/E/S.

FILE PHOTO: Nintendo's Kirby toys are displayed in the Nintendo store in New York, U.S., November 15, 2017. REUTERS/Brendan McDermid/File Photo

Nintendo said it aims to sell 20 million Switch consoles in the financial year started April, confirming its previous forecast made in January.

Sales of the console reached 15 million units in the year ended March, bringing the cumulative total to 17.8 units since its global release in March least year.

YOUNGER AUDIENCE

Nintendo debuted its Wii console in late 2006 and sold over 100 million units, driving the company’s annual profit to a record high of 555 billion yen in the year to March 2009.

The succeeding Wii U, on the other hand, flopped as third-party developers baulked at its complexity, leading to a shortage of titles and sluggish earnings.

“Third-party games publishers were cautious about developing titles for the Switch at first because they thought the Switch wouldn’t sell well,” said Hirokazu Hamamura, head of game magazine publisher Gzbrain Inc.

“They are now planning to release a bunch of new titles, and that would add to the momentum for Switch sales.”

Aiming to end its history of booms and busts, Nintendo is striving to broaden the gaming population. It launched this month “Labo” LEGO-style accessories for the Switch console that users can build themselves on cardboard sheets - a step analysts said could attract a younger audience raised on smartphone gaming.

Mizuho Securities senior analyst Takeshi Koyama said in a report to clients this month that Labo boosts “potential for greater penetration of the Switch”. Its wide-ranging appeal is attracting families normally reluctant to buy their children console gaming systems, he said.

($1 = 109.2900 yen)

Reporting by Makiko Yamazaki and Yoshiyasu ShidaEditing by Christopher Cushing

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