Nintendo Slumps After Tripling Loss Forecast

Nintendo Co. (7974), the world’s largest maker of video-game machines, slumped to an eight-year low in Osaka trading after tripling its loss forecast as the success of rival Apple Inc. (AAPL) devices erodes demand for its 3DS player.

Nintendo dropped as much as 7.8 percent to 9,910 yen, the lowest level on an intraday basis since February 2004. The stock traded 4.5 percent lower at 10,270 yen as of 2:43 p.m. on the Osaka Securities Exchange.

President Satoru Iwata, who cut prices for the 3DS handheld player by as much as 40 percent in 2011, lowered the full-year sales forecast for the device 13 percent to 14 million units. The creator of “Super Mario Bros.” games is predicting its first annual loss in at least three decades because of a surging yen and a consumer preference for gaming on the iPhone and iPad that helped Apple more than double profit last quarter.

“I’m not sure that there is much they can do to reverse the trend,” said Michael Pachter, a Los Angeles-based analyst at Wedbush Securities Inc. The market for handhelds “will be smaller in the future than in the past, limited to people willing to pay a premium for high-quality content to play on a dedicated game device.”

The net loss in the year ending in March may be 65 billion yen ($844 million), compared with an earlier forecast for a loss of 20 billion yen, the Kyoto, Japan-based company said in a statement yesterday. That compared with an expected loss of 29 billion, according to the average of 18 analyst estimates compiled by Bloomberg.

The operating loss this year may be 45 billion yen, compared with an earlier estimate for a profit of 1 billion yen, according to the statement.

New Games

“It took time for us to revive sales momentum” with new titles featuring the Mario character after the 3DS price cuts, Iwata said yesterday.

The console maker hasn’t reported a full-year net loss and operating loss since 1981, when it began releasing consolidated earnings, according to its website.

Nintendo had a foreign exchange loss of 53.7 billion yen in the nine-month period. Nintendo based its annual forecast on the exchange rate of 98 yen to the euro, compared with an earlier forecast of 106 yen. The company kept its estimated exchange rate of 77 yen to the dollar.

Nintendo generates about 80 percent of revenue outside Japan, and a stronger yen reduces the repatriated value of overseas assets. The U.S. currency traded at 76.97 yen, and the euro was unchanged at 101.83 yen at 1:52 p.m. in Tokyo.

Price Cuts

The company cut the price of the 3DS by 40 percent to 15,000 yen in Japan in August. The company reduced the price in the U.S. to $170 from $250. Nintendo sold 11.4 million units of the 3DS handheld player, released in February, in the nine months ended Dec. 31.

Users are increasingly turning to playing on devices from Apple, whose App Store offers more than 100,000 game and entertainment titles for the iPhone, iPad and iPod Touch. Apple on Jan. 24 reported sales of 37 million iPhones in the quarter ended Dec. 31, helping its profit surge to $13.1 billion in the period.

Sales of 3DS title “Monster Hunter 3 (Tri) G” topped 1 million units in the 10 days after it hit the market on Dec. 10, the game’s creator, Capcom Co. (9697), said Dec. 21. “Super Mario 3D Land” and “Mario Kart 7,” introduced in November and December, respectively, each sold more than 1 million units in the U.S., Nintendo said Jan. 3.

Sales of titles for the 3DS may total 38 million units this fiscal year, down 24 percent from the company’s previous estimate, Nintendo said.

Iwata said he is confident the company will return to profit next year and Nintendo will “soon” start charging users for downloading additional content to a software title.

The company also plans to release the Wii U console, its successor to the Wii, in time for the Christmas shopping season this year, he told analysts and investors at a meeting today.

“We will make use of our bitter experience with the 3DS” when the company starts to introduce the new console, Iwata said.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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