Nintendo Tumbles to Six-Year Low as Flop of 3DS Leads to Cut in Forecasts

Nintendo Co. fell to the lowest level in almost six years in Osaka trading after a lack of demand for its new 3-D handheld player led the company to slash the product’s price and earnings forecasts.

The world’s largest maker of video-game machines plunged 12 percent to 12,290 yen at the 3:10 p.m. close on the Osaka Securities Exchange. That’s the biggest drop since January 2009 and the stock’s lowest close since before the Wii console was introduced in November 2006.

Nintendo will cut the price of the five-month-old 3DS player as much as 40 percent, and it lowered the profit forecast 82 percent as more gamers flock to Apple Inc. (AAPL)’s iPhone and online games played on Facebook Inc.’s service. The company needed “drastic measures” to lure gamers, President Satoru Iwata told reporters in Osaka yesterday.

“The company remains in the severe situation for next few years until it develops something revolutionary, not an extension of existing products,” said Mitsuo Shimizu, an analyst at Cosmo Securities Co. in Tokyo. “Social games are killer because who would spend around $40 to buy software when you can get it for free or something much lower.”

For former President Hiroshi Yamauchi, today’s rout lowered the value of his stockholdings by 24.2 billion yen ($312 million). Yamauchi, great grandson of the founder, is the company’s biggest shareholder with a 10 percent stake as of March 31, according to regulatory data compiled by Bloomberg.

Photographer: Kiyoshi Ota/Bloomberg

A boy tries out a Nintendo Co. 3DS handheld game console at the company's showroom in Tokyo, Japan. Close

A boy tries out a Nintendo Co. 3DS handheld game console at the company's showroom in Tokyo, Japan.

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Photographer: Kiyoshi Ota/Bloomberg

A boy tries out a Nintendo Co. 3DS handheld game console at the company's showroom in Tokyo, Japan.

JPMorgan Chase & Co. (JPM) and Nomura Holdings Inc. (8604) were among brokers that cut their ratings on the stock after the earnings missed analysts’ estimates.

3DS Price Cut

Net income may total 20 billion yen for the year ending March 31, compared with Nintendo’s previous estimate of 110 billion yen, the Kyoto-based company said yesterday. The forecast was almost 70 percent below the lowest of the 21 analyst estimates compiled by Bloomberg.

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. In the U.S., the 3DS will cost $169.99 starting Aug. 12, down 32 percent from the current price of $249.99.

“Not a long time has passed since they started to sell 3DS, so it’s a little doubtful if they made much profit out of it,” said Masayuki Ohtani, a strategist at Securities Japan Inc. in Tokyo.

Cheaper Than Vita

The cuts will make the 3DS cheaper than the PlayStation Vita portable player that Sony Corp. (6758) plans to introduce this year.

Nintendo’s 20 billion yen forecast would result in its lowest profit in more than 25 years. The company also slashed its revenue forecast 18 percent to 900 billion yen and 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 March 31, betting the price cut will spur demand. Nintendo cut its annual sales projections for the Wii by 7.7 percent to 12 million and lowered the forecast for previous- generation DS players by 18 percent to 9 million units.

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.

‘Resident Evil’

Capcom Co., based in Osaka, Japan, began selling a game from the “Resident Evil” franchise for the 3DS this fiscal year.

Nintendo, which has about 1 trillion yen in cash, near cash and short-term investments, is 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 should use its ample cash to buy a social game maker, as the place to play games is shifting to smartphones and tablet PCs,” said Masamitsu Ohki, a fund manager at Tokyo-based Stats Investment Management Co. “It doesn’t need to start its own.”

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Yoshinori Eki in Tokyo at yeki@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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