Nintendo chops profit outlook 70% ahead of Wii U launch

AFP-JIJI

Nintendo on Wednesday slashed its annual net profit forecast by 70 percent and said it remained in the red as the videogame giant gets set to launch its next-generation Wii game console.

The Kyoto-based firm blamed a host of factors on its slumping outlook, including a strong yen, price cuts, and weaker-than-expected sales for its consoles and software, which include the “Super Mario” and “Pokemon” brands.

Nintendo is counting on the new Wii U with its tablet-style touch screen controller to boost its balance sheet, after opening playing to masses of “casual players” with motion-sensing controls on the original Wii console in 2006.

Last year, the firm chopped the price of its Nintendo 3DS console — the world’s first video game console with a 3-D screen that works without special glasses — after a lackluster debut as it struggled to boost Christmas sales.

On Wednesday, Nintendo said it expects a net profit of ¥6 billion ($75 million) for the year to March, sharply lower than its earlier forecast of ¥20 billion, on sales of ¥810 billion, down from ¥820 billion.

However, the firm — struggling to reverse its first full-year loss — said it narrowed its shortfall in the six months through September to ¥28 billion, sharply lower than the ¥70.27 billion loss it recorded a year earlier.

First-half sales were down 6.8 percent to ¥200.99 billion, it said.

“Sales of the Nintendo 3DS hardware and software were weaker in overseas markets than expected,” the company said in a statement.

Hardware sales came in at ¥104.7 billion during the first half, Nintendo said, compared with ¥125.5 billion in the same period last year.

Software revenue was higher at ¥95.6 billion from ¥89.6 billion in the year-earlier period.

But Nintendo cut its sales forecast for the 3DS to 17.5 million units for this fiscal year, down from an earlier forecast of 18.5 million units, and said it aimed to sell 5.5 million units of the new Wii U by the end of March.

Nintendo has announced that its next-generation Wii consoles will hit the key U.S. market in late November with a starting price of $300, as it looks to cash in on the Christmas rush.

Hopes that the new console will be a blockbuster at the cash register largely depend on Nintendo rolling out a slick holiday marketing campaign, said Etsuko Tamura, an analyst at Mizuho Investors Securities in Tokyo.

“Advertising will be a key in marketing the game console, which is a product that you need to touch to really appreciate its value,” she said.

The company has struggled against competition not only from traditional rivals such as PlayStation maker Sony and Microsoft’s Xbox, but also cheap online games that can be downloaded to smartphones and tablet computers.

The challenging environment saw the firm post its first annual loss of ¥43.2 billion since becoming a public company in the fiscal year to March.

Japanese exporters have been hit hard by the strong yen, making their products pricier overseas while shrinking the value of repatriated foreign income.