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Nintendo tries to convince investors to wait as profit dives

by and

Bloomberg

Nintendo Co. President Tatsumi Kimishima tried to assure investors the company’s March mobile gaming debut is worth waiting for, even as a 36 percent plunge in quarterly profit highlighted a downward spiral in sales of Wii U and 3DS players.

Nintendo said it will release its Miitomo game for mobile devices next month as anticipated, setting the stage for its biggest shake-up since the 1970s. The company has been forced to acknowledge an industrywide shift toward mobile gaming, while Nintendo’s traditional console business, anchored by legendary hits like Super Mario Brothers and Donkey Kong, struggles.

Net income was ¥29.1 billion ($241 million) in the three months to December after Wii U sales dropped 2.1 percent and those of the 3DS handheld player plunged 28 percent. The stock fell 2 percent at the Tokyo trading break after a briefing to analysts yielded no news on its next console, code-named NX, and small developments on Miitomo.

“More than the immediate earnings results, the markets are looking for hints of Nintendo’s smartphone strategy,” said Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities Co. “There was an initial disappointment when the company unveiled their first title and it wasn’t something that plays to its strengths, like Pokemon or Mario. They have content that can do very well worldwide and the question is how Nintendo plans to capitalize on that potential.”

The results show how much is riding on Nintendo’s foray into mobile. The shares rose 33 percent last year, fueled by the March announcement that the company planned to develop titles for mobile devices made by other companies. Much of the gains were lost, however, after Nintendo delayed the debut in October.

Kimishima offered few details to illuminate the company’s most important strategic move in years. Nintendo plans to start registration for Miitomo from Feb. 17 and release the app next month in Japan and 15 other countries, according to a transcript of remarks Kimishima gave to analysts. Nintendo targets 100 million users for its My Nintendo membership service, but will not require an account to play Miitomo, he said.

He also gave a glimpse into other work in progress. The NX remains on track and the company is even exploring possibilities in virtual reality, though no concrete plans exist as yet, he said Tuesday.

The Kyoto-based company has teamed with DeNA Co., operator of the Mobage network, to create mobile games and operate new membership services that will eventually — though not immediately — include applications based on Nintendo’s character lineup of plumbers, gorillas and princesses. It came under fire last year for sidelining its iconic Mario and Zelda franchises when it revealed that Miitomo will be a free-to-play messaging application.

Kimishima restored some hope by promising to dip into its stable of beloved characters in some fashion.

“Our second game will not be a communication app. We are going to pick some intellectual property that is very well known to everyone,” he said Tuesday without giving further details. “There are plans for new businesses in the works.”

Nintendo has stuck to a forecast for Wii U sales to be little changed this fiscal year at 3.4 million units even though hits like Splatoon and Super Mario Maker, which lets players design their own game levels, failed to ignite demand for the console.

The company maintained its full-year outlook for operating profit of ¥50 billion on sales of ¥570 billion.

  • GBR48

    Line, WhatsApp and Facebook dominate messaging. Not an arena where you’d want to debut with a new product.

    One of the recognised flaws of corporate Japan is an inherent difficulty in responding quickly to market changes. Nintendo should have been exploiting the mobile gaming app field some time ago.

    Share prices aren’t that relevant. People make money most effectively from shares that yo-yo dramatically. You buy, they go up, you sell, they go down. There need be no correlation between the value of the company and the share price. The stock exchange is more a gaming table than a guide to real value.

    Nintendo’s big worry is that they have missed the boat, rather as Psion, Blackberry and Yahoo (global) did. If they have, they may be heading for obsolescence. You’d think that their legacy game formats and characters would to be strong enough to adapt to any format. Time will tell.

    Moral: Watch your market and plan ahead.