Future uncertain as gamers shift to Apple gadgets

Nintendo losses could triple as 3DS sales sink

Bloomberg

Nintendo Co. has more than tripled its full-year loss forecast as the success of Apple Inc.’s popular devices has eroded demand for the company’s 3DS handheld player.

The net loss in the year ending in March could come to ¥65 billion, compared with an earlier forecast of a ¥20 billion loss, the world’s largest maker of video game machines said in a statement Friday. The forecast was far worse than the average loss of ¥29 billion projected by 18 analysts tracked by Bloomberg.

President Satoru Iwata, who cut 3DS prices by as much as 40 percent last year, said he expects full-year sales of 14 million units for the device that shows images in 3-D, down from an earlier forecast of 16 million. The creator of “Super Mario Bros.” games is predicting its first annual loss in at least three decades because of the surging yen and a consumer preference for gaming on the iPhone and iPad that helped Apple more than double profit in the quarter.

“The company faces a structural problem . . . people are opting for their smartphones and tablet PCs to kill their time,” said Mitsushige Akino, who oversees about $600 million at Ichiyoshi Investment Management Co. in Tokyo. “I can’t see Nintendo’s next strategy. There will probably be a discussion about how much worse it can get.”

Operating loss in the year ending March 31 could be ¥45 billion, compared with an earlier estimate for a ¥1 billion profit, according to the statement.

On Friday, Nintendo also reported a nine-month net loss of ¥48.4 billion, compared with a profit of ¥49.6 billion a year earlier.

Nintendo had a foreign-exchange loss of ¥53.7 billion in the nine-month period. The Kyoto-based company based its annual forecast on an exchange rate of ¥98 to the euro, compared with an earlier forecast of ¥106, but maintained its rate of ¥77 to the dollar.

“Nintendo’s profitability may get lower in the long term because people are starting to stay away from video game consoles,” said Tomoaki Kawasaki, a senior analyst at Cosmo Securities Co. in Tokyo with a “neutral” rating on the stock, before the earnings release. “The yen’s gain is a burden for Nintendo as it hasn’t taken sufficient measures to deal with the impact of the strong currency.”

Nintendo generates about 80 percent of its revenue overseas, and a stronger yen reduces the repatriated value of overseas assets.

The console maker hasn’t reported a full-year net loss since 1981, when it began releasing consolidated earnings, according to its website.

In the domestic market, Nintendo cut the price of the 3DS by 40 percent to ¥15,000 in August. It also reduced the price in the U.S. to $170 from $250.

Nintendo released the 3DS handheld player in February and sold 11.4 million units in the nine months through Dec. 31.

Wii sales in the same period fell 35 percent to 8.96 million units.

The Wii U console, Nintendo’s successor to the Wii, will be introduced in time for the Christmas shopping season, Iwata said.

Users are increasingly turning to playing games on Apple’s devices, with the App Store offering more than 100,000 game and entertainment titles for the iPhone, iPad and iPod Touch.

Sales of titles for the 3DS may total 38 million units this fiscal year, down 24 percent from the company’s previous estimate, Nintendo said Jan. 3.

Iwata said he is confident the company will turn profitable next year and added that Nintendo will “soon” start charging users for downloading additional content to a software title.