Nintendo expects profit despite recession amid strong demand for Wii, upgrade of DS consoleBy Yuri Kageyama, Gaea News Network
Monday, May 4, 2009
Nintendo on roll on Wii, but cautious on high yen
TOKYO — Japanese video game and console maker Nintendo Co. reports fiscal fourth quarter earnings on Thursday. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: Unlike other major Japanese manufacturers battered by the global slowdown, Nintendo has racked up solid sales of its machines, the Wii home console and the DS portable, appearing to underline the often-expressed view of President Satoru Iwata that Nintendo is relatively recession-free.
In recent months, the Kyoto-based maker of Pokemon and Super Mario games has fixed its chronic supply shortage problem, allowing production to catch up with booming demand.
The only exception appears to be Japan, a notoriously trend-conscious market, where sales momentum for the Wii is gradually running out. Game software scheduled to go on sale in upcoming weeks may help reverse that.
Another danger is the strong yen, which trims the value of overseas earnings, and Nintendo makes more than 85 percent of its sales overseas.
On the plus side is the DSi, the upgrade of the popular handheld game device, which went on sale in Japan late last year and last month in the U.S. and Europe.
BY THE NUMBERS: Nintendo has lowered its forecasts for the fiscal year to account for the strong yen as well as the global slowdown.
Nintendo is expecting a net profit of 230 billion yen ($2.3 billion) for the fiscal year ending March 31, down 10.6 percent from the previous year and below its earlier forecast for a 345 billion yen profit. Sales are expected to grow 8.8 percent to 1.82 trillion yen, but below its previous forecast for 2 trillion yen sales.
Analysts surveyed by Thomson Reuters, on average, expect fiscal year profit of 245.6 billion yen.
It is also lowering its Wii shipment forecast for the fiscal year that ended March to 26.5 million from 27.5 million. But it’s bullish on the DSi, expecting to ship 31.5 million machines during the fiscal year, 1 million more than the initial forecast.
Nintendo has sold more than 50 million Wii consoles worldwide since late 2006, and more than 100 million DS machines cumulative worldwide.
ANALYST TAKE: Nomura Securities Co. remains bullish on Nintendo, shrugging off the year-on-year decline in U.S. unit sales of the DS and Wii in March as caused by consumers waiting for the arrival of the DSi and the absence of major Wii software games comparable to “Super Smash Bros. Brawl,” which went on sale in March 2008.
“We think this represents a temporary reactionary decline rather than the impact of the economic slowdown in the U.S. or demand peaking out,” Nomura said in a recent report. “We expect Wii sales to gain momentum again after the July launch of the eagerly awaited ‘Wii Sports Resort.’”
WHAT’S AHEAD: Nintendo is trying to turn the Wii into a living room must-have by introducing video-on-demand and other Internet-linking services.
It’s the latest stage in its ongoing mission to woo people who aren’t the usual gaming crowd, such as the elderly and women.
But even Iwata acknowledges Nintendo has to keep coming up with innovations.
Nintendo is hoping to turn its DS into a Net-linking mobile device to receive audio guidance at a museum or coupons at a shopping mall, and it has been testing it out as an educational tool in schools.
Nintendo continues to face challenges from formidable rivals, Microsoft Corp. with its Xbox 360 home machine and Sony Corp. with its PlayStation 3, PlayStation 2 and PlayStation Portable.
STOCK PERFORMANCE: Nintendo shares have lost more than half their value over the past year. On Friday, the last day of trading before Tokyo markets closed for national holidays, Nintendo gained 1.3 percent to close at 26,550 yen.
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