Nintendo Lowers Profit Forecast 82%, Slashes Prices of 3DS Handheld Player
Nintendo Co., the world’s largest maker of video-game machines, unexpectedly slashed its profit forecast 82 percent after slumping demand for its new 3-D handheld player led the company to cut prices of the product.
Net income may total 20 billion yen ($257 million) for the year ending March 31, compared with Nintendo’s previous estimate of 110 billion yen, the Kyoto-based company said in a statement today. The forecast was almost 70 percent below the lowest of the 21 analyst estimates compiled by Bloomberg.
Nintendo will cut the price of the 3DS by 40 percent, less than six months after the product’s debut, as gamers flock toward Apple Inc. (AAPL)’s iPhone and online games played on Facebook Inc.’s service. President Satoru Iwata is counting on the reduced prices and new titles such as “Mario Kart” to spur demand for the new portable player and help the stock rebound from near five-year lows.
“Nintendo is getting desperate,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments Ltd. in Tokyo, which manages $28 billion. “The video-game industry is in a tough period with consumers shifting to playing on their smartphones.”
Nintendo, the third-worst performer in the MSCI Japan Index this year, rose 0.1 percent to 14,000 yen on the Osaka Securities Exchange before the company released earnings. The stock has fallen 41 percent in 2011.
Cheaper Than Vita
The price of the 3DS, released in February, will be lowered to 15,000 yen from 25,000 yen in Japan starting Aug. 11, to trigger “momentum” for the product before the year-end shopping season, the company said. Prices will be cut overseas before the end of September, it said.
The cuts will make the 3DS cheaper than the PlayStation Vita portable player that Sony Corp. (6758) plans to introduce this year.
Nintendo lowered its revenue forecast 18 percent to 900 billion yen. It also reduced the full-year operating profit estimate by 80 percent to 35 billion yen.
The video-game maker kept a forecast to sell 16 million 3DS players by the end of the March, betting the price cut will spur demand. Nintendo cut its annual sales projections for the Wii game console by 7.7 percent to 12 million and lowered the forecast for previous-generation DS players by 18 percent to 9 million units.
Mario to the Rescue?
The company plans to introduce flagship titles such as “Super Mario 3DLand” and “Mario Kart” in November and December for the 3DS, the company said. Capcom Co. began selling a game from the “Resident Evil” franchise for the 3DS this fiscal year.
For the quarter ended June 30, Nintendo had a loss of 25.5 billion yen, as sales tumbled 50 percent, the company said.
Sony, Nintendo’s main domestic rival in games, today cut its annual profit forecast after a slump in demand in the U.S. and Europe led the company to lower its estimate for television sales. Last month, Sony said the PSP Vita will sell from $249 in the U.S., 249 euros ($359) in Europe and 24,980 yen in Japan. The handheld game player will feature a five-inch display and a rear touch pad.
Nintendo is also facing increasing competition from Apple, which has sold more than 200 million devices capable of downloading and playing games. Apple’s App Store offers a choice of more than 100,000 game and entertainment applications to users of the iPad, iPhone and iPod Touch.
Nintendo based its annual earnings estimates on exchange rates of 80 yen against the dollar and 115 yen per euro, compared with its previous rates of 83 yen and 120 yen respectively.
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