Nintendo Co., the world’s largest maker of video game machines, forecast its first annual loss on record amid the yen’s surge to a new postwar high and weaker than expected sales of the new 3DS console.
The net loss may be ¥20 billion for the year ending in March, compared with a previous projection for a ¥20 billion profit, Nintendo said in a statement Thursday. That compares with an average profit estimate of ¥12.2 billion based on the forecasts of 22 analysts contacted by Bloomberg.
Nintendo, which generates about 80 percent of its revenue in the Americas and Europe, is predicting lower profits after the yen soared against the dollar and climbed to a decade high against the euro, trimming the repatriated value of overseas sales. President Satoru Iwata cut the price of the 3DS by 40 percent in August as gaming fans flock to Apple Inc.’s iPhone and iPad, and Facebook’s website.
“Nintendo faces a very harsh time now,” said Koichi Ogawa at Tokyo-based Daiwa SB Investments Ltd., which manages $28 billion of assets. “Competition in the video game industry is becoming severe, and Nintendo must fight for customers who are using smartphones and tablets.”
The full-year sales forecast was cut to ¥790 billion, compared with an earlier forecast for ¥900 billion, according to Thursday’s statement. Operating profit in the 12 months ending March 31 may be ¥1 billion, lower than the ¥35 billion predicted earlier.
“We are cutting costs steadily and plan to release major titles seamlessly” to recover earnings, Iwata said at a mews conference in Osaka.
The console maker hasn’t reported a full-year net loss since it began releasing its consolidated earnings in 1981, according to the company’s website.
“Sales of Nintendo DS hardware and Nintendo 3DS software were weaker than expected,” the company said in the statement. “In addition, the yen appreciation was beyond expectation.”
Nintendo had a ¥52.4 billion foreign-exchange loss in the first six months of the 2011 fiscal year, according to the statement.
The company based its second-half forecast on exchange rates of ¥77 to the dollar and ¥106 to the euro, changing them from ¥80 and ¥115. The yen gained 13 percent against the euro last quarter, while extending its value against the dollar by 4.5 percent, according to data compiled by Bloomberg.
Nintendo also reported a first-half loss of ¥70.2 billion, wider than the ¥2 billion loss a year earlier.
The company kept the sales forecast for the 3DS model at 16 million units, it said. Nintendo sold 3.07 million units of the 3DS, which was released in February, in the first half.
Nintendo’s archrival, Sony Corp., will outline sales of its handheld PSP console next week. In July, it forecast sales of 6 million for the year ending March 31.
“We expect 3DS sales will surge at a stretch toward the end of this year” based on the recent sales trend, Iwata said.
Sales of software titles for the 3DS may total 50 million units this fiscal year, down 29 percent from the company’s previous estimate of 70 million, Nintendo said.
Nintendo cut the price of the 3DS to ¥15,000 from ¥25,000 in Japan, and to $170 from $250 in the U.S. to help regain “sales momentum,” Iwata said in July. The 3DS allows users to see 3-D images without wearing special glasses.
Sony plans to introduce the PlayStation Vita portable player this year.
In June, Sony said the PSP Vita will sell from $249 (about ¥19,000) in the U.S., €249 (about ¥27,000) in Europe and ¥24,980 in Japan. The handheld game player will feature a 5-inch (12.7 cm) display and a rear touch pad.
Sony, Nintendo and Microsoft Corp., which makes the Xbox 360 and Kinect devices, are confronting new competitors in the gaming industry that are reshaping the field.
They include Apple, which estimates it’s sold more than 200 million mobile devices capable of downloading and playing games.
Its App Store offers more than 100,000 game and entertainment applications for the iPad, iPhone and iPod Touch.
Nintendo plans to introduce the Wii U console as a successor to its bestselling Wii model after next June, Iwata told reporters. The Wii U controller has a front-facing camera, a 6.2-inch (15.7 cm) touch screen, shoulder firing pads, an expansion slot and game controls on a flat pad.
Users will be able to wirelessly connect to the console and shift content between a large screen in the living room and the smaller screen.
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