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Disappointing Forecast For Nintendo Says First Loss In 3 Decades

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With some 80% of revenue coming from the Americas and Europe, Nintendo is suffering from the devalued western currencies. (Photo: Josiah Gordon)
With some 80% of revenue coming from the Americas and Europe, Nintendo is suffering from the devalued western currencies. (Photo: Josiah Gordon)

FINANCE

  • Weak Wii, 3DS sales lead to Q2 loss
  • Forecast for 20 billion yen ($264 million) loss
  • Post-war high for yen compounds difficulties

Nintendo posted its second straight loss of the year yesterday, prompting executives to forecast the company’s first annual loss in over three decades.

Slow second-quarter sales of its Wii and 3DS handheld console dragged the world’s biggest video game maker further into the red, with expectations of as much as 20 billion yen ($264 million) in losses for the fiscal year ending March. Sales forecasts also dropped 12% to 790 billion yen.

Earlier in the year, the company had forecast a 20 billion yen profit, with analyst predictions at around 12.2 billion yen.

The yen is currently at a post-war high against the US dollar and a ten-year high against the euro. With some 80% of revenue coming from the Americas and Europe, Nintendo is suffering from devalued western currencies.

Following the announcement of its Q2 financials, the company issued a statement saying: “Sales of Nintendo DS hardware and Nintendo 3DS software were weaker than expected. In addition, the yen appreciation was beyond expectation.”

Detrimental Diversification

Koichi Ogawa, an analyst at financial services firm Daiwa SB Investments told Bloomberg the diversifying gaming landscape was forcing Nintendo to slash its prices. “Nintendo faces a very harsh time now. Competition in the video game industry is getting severe, and Nintendo must fight for customers who are using smartphones and tablets,” Ogawa said.

In Japan, a huge 40% chunk came off the retail cost of its 3DS, with the price dropping to 15,000 yen. In the US, the price tag was brought down from $250 to $170.

Shares in Nintendo saw a 0.6% drop Thursday in Osaka, closing the day at 11,110 yen and bringing the year-to-date loss to 53%.

The Kyoto-based company has not posted an annual loss since 1981, when it first began publishing its earnings.

Wii Stagnant

While overall forecasts were revised down, Nintendo maintained its 3DS sales predictions of 16 million units for the full year. With only 3 million units sold at the halfway point, the company will be looking for a healthy holiday season to boost figures before next March.

When Nintendo brought out the Wii it far outsold Microsoft’s Xbox 360 and Sony’s PlayStation 3, which were released around the same time. The Wii’s simple appeal struck a chord with a much broader consumer base than its more “enthusiast” rival consoles.

It took Microsoft and Sony several years to bridge the gap with many updates and additional features, while modifications to the Wii, along with its handheld DS sidekick, did not offer any significant changes.

Nintendo has scheduled the release of its Wii successor, the Wii U, for June 2012. The new tablet-style controller will feature an in-built camera with a 6.2-inch tactile screen, shoulder trigger buttons and an SD expansion slot.

Users will be able to connect wirelessly to the console to play either on the smaller handheld screen or on the television for the full gaming experience.

Key Statistics – World Video Games Market (source: DFC Intelligence)   

  • Revenue for the global video game market was $65 billion in 2011, compared to nearly $63 billion in 2010.
  • Retail software revenue reached $29.5 billion in 2011, slightly lower than the close to $30 billion in 2010.
  • Online gaming revenue, including Facebook games, subscriptions and digital delivery, totaled $18 billion, compared to nearly $16 billion the previous year.

By James Mulholland for
James Mulholland is a Paris-based internet and broadcast journalist specializing in sports, current affairs and technology news, while also freelancing as a photographer.

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