Nintendo Co. will spend as much as ¥125 billion buying back shares after Christmas shoppers shunned its Wii U console and games.
The world’s largest maker of video game machines will buy back as many as 10 million shares, or as much as 7.82 percent of outstanding shares, the company said in a statement Wednesday.
Nintendo had about $8.6 billion in cash and equivalents and zero debt as of Sept. 30.
Nintendo shocked the market this month when it forecast a surprise annual loss, cut Wii U sales projections and said it is considering a new business model.
President Satoru Iwata, who is taking a 50 percent pay cut, is under pressure to find a new hit product as casual players move to smartphones and tablet computers, and hard-core gamers flock to faster consoles from Sony Corp. and Microsoft Corp.
“The sense of crisis at Nintendo’s management has risen high,” Satoshi Tanaka, an analyst at Daiwa Securities Co., said before the earnings announcement. “A change to its business model is the kind of comment no one would ever expect to hear from Nintendo.”
Net income plunged 77 percent in the third quarter to ¥9.6 billion, according to figures derived from nine-month totals announced by the company. Operating profit fell 6.9 percent to ¥21.7 billion.
Nintendo sold 2.4 million Wii U units in the nine months that ended in December, the company said. Sony said this month it sold 4.2 million units of its PlayStation 4 since it went on sale Nov. 15, and Microsoft shipped more than 3 million Xbox One machines.
“In the fourth quarter, we expect sales to decrease significantly due to seasonal factors as the yearend sales season concludes,” Nintendo said.
Iwata said he will cut his pay from February to June, and other company directors will take pay cuts of as much as 30 percent.
Iwata, 54, will discuss his strategy for the company at a news conference in Tokyo on Thursday. Nintendo is studying new ways to revive sales after previously ruling out licensing its franchise characters for online games or applications, Iwata said earlier this month.
The president has said he won’t step down after 12 years running the company, and he has no plans to change managers in the near term.
When Iwata was appointed in 2002, he became the company’s first president from outside the founding Yamauchi family since it started selling cards in the late 19th century.
Iwata subsequently tripled revenue by introducing such hits as the Game Boy Advance SP, the Wii and the Nintendo DS handheld player.
Yet the casual gamers who made Nintendo the leader of a $93 billion industry have abandoned the Wii U for cheap downloads they can play on a Samsung Electronics Co. Galaxy smartphone or an Apple Inc. iPad.
The Wii U also lost its appeal to many dedicated gamers, who prefer Sony’s new PlayStation 4 or Microsoft’s Xbox One.
Since reaching an all-time high of ¥72,100 in November 2007, the company has lost more than 80 percent of its value.
Nintendo on Jan. 17 lowered its annual sales forecast to 2.8 million Wii U units from 9 million and halved its projection for Wii U game sales to 19 million units. The company cut its forecast for the 3DS handheld player by 25 percent to 13.5 million units.
“Business conditions are worsening, users are opting for rival hardware and smart devices, and fixed costs are high while sales are falling,” Masaru Sugiyama and Takashi Watanabe, Tokyo-based analysts for Goldman Sachs Group Inc., said in a report issued Monday. “We think a strategy upgrade is needed.”
They downgraded the stock to sell and cut Nintendo’s 12-month target price to ¥11,000 from ¥12,000.
The sales totals so far for the Sony and Microsoft consoles each exceed the Wii U sales forecast for the entire year.
“It’s apparent to me that Wii U won’t ever gain traction as a successful platform,” said Sumito Takeda, an analyst for UBS AG. “It’s better to use resources for the next product.”