Nintendo Co. President Satoru Iwata has pledged that the “Super Mario” game creator will post a 100 billion-yen ($1 billion) operating profit this fiscal year as new software titles boost sales. Analysts say he’ll fail.
Iwata will announce a second straight annual loss tomorrow, losing 18.7 billion yen in the 12 months ended March 31, according to the average of 15 estimates compiled by Bloomberg. For the year started April 1, Nintendo may post operating income of 70 billion yen, according to the average of 19 estimates -- short of a target he said was a personal “commitment.”
Nintendo’s Wii U, its first new home-gaming console since 2006, is failing to meet sales targets amid a delay of software releases that Iwata said were crucial to winning over consumers who increasingly play games on smartphones and tablet computers. Sony Corp. (6758) and Microsoft Corp. are also preparing to release upgraded consoles this year, adding pressure on the 53-year-old executive, who’s been in the role since 2002.
“Iwata hasn’t produced good results in recent years,” said Hideki Yasuda, a Tokyo-based analyst at Ace Securities Co. “He can’t avoid being criticized.”
Yasuda rates the stock neutral, or hold. Only 4 of 20 analysts tracked by Bloomberg recommend buying Nintendo shares, while 13 recommend holding them and 3 recommend investors sell.
Yasuhiro Minagawa, a spokesman for Kyoto-based Nintendo, declined to comment on the difference between its commitment and analysts’ forecasts. The company will release earnings after the close of trade tomorrow.
Nintendo fell 1.8 percent to 11,420 yen at the 3 p.m. close of trade in Osaka, trimming its gain this year to 25 percent, compared with a 30 percent surge in Japan’s benchmark Nikkei 225 Stock Average. Sony has jumped 70 percent in Tokyo.
Even as a weaker yen boosts the repatriated value of overseas earnings for Japanese exporters such as Nintendo, it may not be enough to meet Iwata’s profit target as the Wii U struggles to gain traction.
“I don’t think Nintendo can achieve 100 billion yen,” said Yoshikazu Shimada, an analyst at Tachibana Securities Co. “It’s hard for Nintendo to meet the target despite the weak yen’s tailwind.”
To help win back gamers from mobile devices, the company last year released the Wii U, combining TV screen action with a touch-screen controller in the company’s first new console since the original Wii was released in 2006.
To avoid repeating the mistake Nintendo made with its 3DS handheld player, which had its price cut within six months of a 2011 debut on a lack of software, Iwata promised to keep the pipeline of games for the Wii U strong.
Preparing software would drive demand for hardware such as the Wii U, Iwata said in June before the machine’s debut.
He couldn’t maintain it as Nintendo halted new software for the Wii U at the start of this year because of development delays, Iwata said Jan. 31.
In Japan, the release of “Pikmin 3” in Japan was delayed to July from this spring, according to the company’s announcements. “Game & Wario” was pushed back to March 28 from the beginning of the year.
“He has been one step behind in some strategic points,” said Eiji Maeda, an analyst at SMBC Nikko Securities Inc. “Contents are important to increase game fans. But Nintendo couldn’t provide game titles.”
The company may have sold 3.5 million Wii Us last fiscal year, missing its target of 4 million, Takeshi Koyama, a Tokyo- based analyst at Mizuho Financial Group Inc. (8411), said in a report April 16. The company may sell 9 million units this fiscal year, he said.
Nintendo also faces tougher competition for game players from rival console makers in a market that is shrinking amid the shift to mobile devices.
Sony said in February it will release a Playstation 4 before the year-end holiday season, its first upgrade in seven years. Microsoft may unveil the successor to its Xbox 360 at the gaming industry’s E3 expo in June or a separate event in May, three people familiar with the plans said this month.
U.S. retail sales of video-game hardware, software and accessories fell 10 percent to $992.5 million last month, according to NPD Group Inc. Hardware sales fell the most, declining 32 percent from a year earlier, the Port Washington, New York-based research firm said April 18.
While Nintendo struggles with its main business, a weakening of the yen may give some relief. The Japanese currency has depreciated about 12 percent against the U.S. dollar this year and touched a four-year low of 99.95 on April 11.
That may enable the company to post net income of 14 billion yen tomorrow, the company said in January.
While the currency helps, refreshing the game development pipeline is critical to a sustained turnaround, with Nintendo planning to add titles including “Pikmin 3” and “Wii Fit U.”
“Nintendo can achieve the target if it can release the game software as planned,” said Yasuda at Ace Securities.
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