Oct. 29 (Bloomberg) -- Nintendo Co., the world’s largest maker of video-game players, lowered its annual profit and revenue forecasts on slumping sales of the company’s flagship Wii consoles.

Net income will fall to 230 billion yen ($2.5 billion) in the year to March 2010, the Kyoto-based company said in a statement today. The projected profit, the first annual drop in six years, missed the 270 billion yen median of 23 analyst estimates compiled by Bloomberg.

The company, which cut Wii prices 20 percent a month ago, forecast the motion-sensing machine’s first annual drop in shipments, citing a lack of strong software titles. The Wii ended its three-year reign as the best-selling console in the U.S. and Japan during September after Sony Corp. lowered the price of the PlayStation 3 by 25 percent, according to market- research firm estimates.

“Consumers are cutting unnecessary expenses in the face of falling disposable income, and Nintendo can’t avoid that,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $56 billion in Tokyo. “You won’t die without games.”

Net income dropped 52 percent to 69.5 billion yen in the six months ended Sept. 30, from 144.8 billion yen a year earlier, the company said.

Falling Shares

Shares of Nintendo fell 1.1 percent to close at 24,050 yen in Osaka trading before the announcement, extending their loss this year to 29 percent.

“We need a fairly big number for Wii sales to attain the revised forecasts,” President Satoru Iwata told reporters in Osaka. “We sense the momentum is returning.”

Full-year operating profit, or sales minus the cost of goods sold and administrative expenses, will probably fall 33 percent to 370 billion yen and revenue may drop 18 percent, Nintendo said.

The company also cut its projection for full-year sales of the Wii to 20 million units from 26 million and reduced the projected annual dividend payment 24 percent to 960 yen a share.

Pressure is building for Iwata to deliver new hit titles and accessories after the company in July reported its first drop in global quarterly Wii sales. The company said in June it’s developing a device called the Vitality Sensor that can track users’ heart rates and other body functions.

New Product Needed

“Nintendo needs to build up a sales-promotion scheme or introduce a new product to drive its earnings,” said Mia Nagasaka, a Tokyo-based analyst at Barclays Plc.

The game maker sold 5.75 million Wii consoles in the six months to Sept. 30, 43 percent fewer than the 10.1 million units sold a year earlier. DS hand-held player sales declined 15 percent to 11.7 million, Nintendo said.

DS sales will probably fall 3.8 percent to 30 million units in the year ending March 31, Nintendo said, reiterating its previous forecast.

Nintendo attributed its lower earnings estimates to the impact of the stronger yen. It revised its average estimate for the dollar to 90 yen from 100 yen for the current fiscal year.

Competitiveness Undermined

The yen strengthened against the dollar and euro in the past four quarters, reducing the value of Japanese manufacturers’ overseas sales and undermining their ability to compete against foreign companies such as Samsung Electronics Co.

Gaming software revenue fell 27 percent to 234.2 billion yen in the six months ended Sept. 30, Nintendo said.

Sony’s PlayStation 3 helped the U.S. video-game market end six consecutive months of declining revenue, according to researcher NPD Group Inc. Sony sold a record 309,939 PS3 consoles in Japan from Aug. 31 to Sept. 27, according to Tokyo- based research firm Enterbrain Inc.

Hardware, software and accessory sales in the U.S., the world’s largest video-game market, rose 1 percent to $1.28 billion last month, NPD said this month. PS3 sales more than doubled to 491,800, while those of the Wii fell 33 percent to 462,800. Microsoft Corp.’s Xbox 360 sales gained 1.6 percent to 352,600.

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net.

Last Updated: October 29, 2009 06:03 EDT