Nintendo Raises Profit Forecast 20% on DS Game Sales (Update3)

Jan. 10 (Bloomberg) -- Nintendo Co., the world's biggest maker of handheld game players, raised its full-year profit forecast by 20 percent on sales of DS portable devices and increased targets for Wii games.

Net income will rise to 120 billion yen ($1 billion) for the year to March 31, compared with an October estimate for 100 billion yen, the Kyoto-based company said in a statement today. Nintendo reported 98.4 billion yen profit a year earlier.

Nintendo's two-year-old touch-screen DS player is driving sales of Super Mario games and newer titles such as Nintendogs. The company is also making inroads in home consoles after it sold twice as many Wii players as Sony Corp.'s PlayStation 3 in Japan last year, said Enterbrain Inc., a Tokyo-based research firm.

``Nintendo is going like gangbusters, and the Wii consoles are selling like hotcakes,'' said Edwin Merner, who oversees $1 billion as president of Atlantis Investment Research Corp. in Tokyo. ``They have momentum, and I think you can expect them to surpass earnings estimates for the next year or two.''

Sales this year will probably rise to 900 billion yen, compared with a 740 billion yen forecast in October and 509.2 billion yen a year earlier, the company said. Nintendo also raised it full-year dividend forecast to 480 yen, from the October estimate of 400 yen and 390 yen a year earlier.

Nintendo shares climbed 2.4 percent to 29,150 yen as of the 3 p.m. close on the Tokyo Stock Exchange. The stock more than doubled in value last year, becoming the Topix index's third-best performing stock.

``The revision far exceeds my expectations,'' said analyst Etsuko Tamura at Mizuho Investors Securities Co. in Tokyo, who rates Nintendo ``neutral plus.''

Games, Players

The company today raised its sales forecast for DS players this fiscal year by 15 percent to 23 million units and software by 22 percent to 100 million units. Sales of Wii games will reach 21 million this year, compared with an earlier target of 17 million.

``They are bringing a lot of software into the market and that is where they are going to make the money, not on the consoles,'' Atlantis Investment's Merner said.

The company left its full-year target for Wii console sales unchanged at 6 million units.

``The Wii hardware target is the number the company can make by the end of March, not the number they can sell,'' said Yuuta Sakurai, an analyst at Nomura Research Institute Ltd. who has a ``buy'' rating on the stock. ``Sales momentum is very strong.''

Nintendo sold 989,118 Wii units in Japan since the console became available on Dec. 2, Enterbrain said yesterday. Tokyo-based Sony, the world's largest maker of video-game consoles, sold 466,716 PlayStation 3 machines in Japan since its release there on Nov. 11, the research firm said.

Sony, Microsoft

Sony, which expected to deliver 1 million PlayStation 3s in Japan in 2006, yesterday said it met a 1 million-unit target in the U.S. Redmond, Washington-based Microsoft Corp. sold 10.4 million Xbox 360 consoles worldwide last year, beating a target for 10 million units, the company said Jan. 7.

Surging sales of Nintendo's Wii are making it more difficult for Sony to hold its lead. Sony was hurt by parts shortages that limited the availability of the PlayStation 3 and as Nintendo's lower price and motion-sensitive controller attracted buyers.

While the PlayStation 3 sells for as much as $600, more than twice the cost of the Wii, it is attracting customers with its sharper graphics, online gaming features and high-definition Blu-ray DVD player. The Wii is luring users with its $250 price and a motion-sensor that enables them to play virtual tennis and golf.

Nintendo's DS was the most popular device in Japan's $2.2 billion game hardware market in 2006, selling 7.53 million units, according to Enterbrain. Sony's PlayStation Portable was second with 1.95 million units.

Software Sales

DS games titles, such as Super Mario Brothers, Mario Carts and Tetris, occupied eight spots in the top 10 best-selling games in Japan last year, the researcher said. PlayStation Portable's best-selling title was 30th on the chart.

The dual screen DS makes uses a stylus instead of button controls, making it easier for users to play Frisbee with their virtual pets, practice calligraphy and draw pictures. Nintendo is also looking to capture an older audience with a ``brain-training'' game and tutorials for cooking and language.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net.

To contact the editor responsible for this story: Teo Chian Wei at cwteo@bloomberg.net.