It’s spring in Kyoto, and hope springs eternal for Nintendo (7974:JP). The beleaguered company fell short of its sales targets for the Wii video-game console last quarter while losing more money than analysts expected. Still, Nintendo sees a return to profitability ahead, reversing a net loss of $228 million this year with a predicted net income of $196 million for next year.
There are reasons to doubt Nintendo’s optimism. The company hasn’t responded well to a shift from console games to smartphone games and still lacks a coherent strategy for mobile devices. Nintendo is also more susceptible than such rivals as Microsoft (MSFT) and Sony (SNE) to losing out to mobile because its devices has always relied on casual gamers, who are most likely to be seduced by Candy Crush Saga (KING). While the hardcore crowd still needs an XBox or Playstation to keep up with the latest blockbusters, Nintendo’s fan base doesn’t seem to need a gaming device beyond a phone.
Then there’s the quality of Nintendo’s past forecasts. Last April, for instance, the company said it would bring in ¥920 billion ($9 billion) over the course of the year. By January the revenue projections had been nearly cut in half, to ¥590 billion. And on Wednesday the company reported revenue of ¥571 yen—or 62 percent of its original forecast from last year. The same pattern played out over the prior fiscal year, when the forecast called for sales of ¥810 billion and ended with ¥635 billion in actual sales.
The consistently rosy tint to Nintendo’s forecasts seems to point to a company that simply hasn’t grasped the extent to which the video-game industry has shifted under its feet. This doesn’t bode well, given that acceptance is always the first step towards recovery.