Nintendo Aided With Yen Masking Slump in Player Sales

Nintendo (7974) Co. profit surged as the weaker yen masked plunging sales of Wii consoles and DS handheld players by the world’s biggest video-game machine maker.

Net income was 8.62 billion yen ($88 million) in the three months ended June, compared with a loss of 17.2 billion yen a year earlier, the Kyoto, Japan-based company said in a statement yesterday. Nintendo booked a 16.9 billion-yen gain from currency movements in the period.

President Satoru Iwata took the helm of U.S. operations to drive sales growth at the creator of Super Mario before Sony Corp. (6758) and Microsoft Corp. (MSFT) introduce new consoles for this year’s holiday shopping season. Yet combined sales for Nintendo’s hardware totaled 1.8 million units in the quarter ended June, down from 3.1 million units a year earlier, as more customers migrated to mobile devices for playing online games.

“It’s difficult to make a positive assessment for a company that’s posting a drop in sales,” said Masamitsu Ohki, a fund manager at the Stats Investment Management Co. hedge fund in Tokyo. “The only reason the company managed to post net income was a weaker yen. Sales of its hardware look terrible.”

Sales fell 3.8 percent to 81.55 billion yen from 84.8 billion yen a year earlier. Nintendo said almost 64 percent of revenue last quarter came from overseas.

Net income surpassed the 1.3 billion-yen median estimate of three analysts surveyed by Bloomberg News. The company’s operating loss narrowed to 4.9 billion yen from a loss of 10.3 billion yen.

Forecasts Maintained

Nintendo rose 5.1 percent to 13,050 yen as of close of trade in Tokyo, extending this year’s gain to 44 percent. The benchmark Topix index has risen 35 percent this year.

A weaker Japanese currency is boosting the repatriated value of overseas earnings for the nation’s exporters. The yen depreciated about 5 percent against the U.S. dollar last quarter and about 20 percent in the 12 months ended June 30.

Nintendo posted valuation gain from its foreign reserves, and the company affirmed its forecast for operating income of 100 billion yen and net income of 55 billion yen in the 12 months ending March.

“I don’t think Nintendo can achieve its commitment of 100 billion yen because it has no way to improve,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co. in Tokyo. “It cannot go back to the age when the Wii and DS sold well as there now are many devices for killing time, such as smartphones and tablets.”

Smartphones Surge

The company sold 1.4 million 3DS units in the quarter, down from 1.86 million a year earlier. It also sold 160,000 units of the Wii U, pushing the overall total to 3.6 million since its debut in November.

By comparison, smartphone shipments surged 47 percent to 229.6 million in the second quarter from a year earlier, market researcher Strategy Analytics said July 26.

“Wii U hardware sales still have a negative impact on Nintendo’s profits,” the company said.

Since reaching an all-time high in November 2007, the company has lost more than 80 percent of its value.

Nintendo expects to sell 9 million Wii U consoles this fiscal year, it said in April. Nintendo forecast 3DS sales of 18 million, up from 13.95 million last year.

PlayStation, Xbox

Nintendo said last month it sold 225,000 units of the 3DS in the U.S. in June. Games including “Animal Crossing: New Leaf” helped the player maintain its position as the best-seller, according to market researcher NPD Group Inc.

Nintendo is scheduled to release “Mario & Luigi: Dream Team” for the 3DS on Aug. 11 in the U.S.

The machine also was Japan’s best-selling gaming device in June with sales of 192,487 units, according to market researcher Enterbrain Inc. Sony’s PlayStation Vita sold 81,912 units in the same period, Tokyo-based Enterbrain said July 9.

Global software sales for the 3DS jumped 49 percent to 11 million units last quarter, Nintendo said. Still, U.S. video-game retail sales fell 15 percent to $593.3 million in June, Port Washington, New York-based NPD said.

The Wii U, priced starting at $300, features a 6.2-inch touchscreen controller that lets users wirelessly connect to the console and shift the display between the device and a TV. It is the industry’s first new home-gaming console since 2006, the year Nintendo released its predecessor, the Wii.

Sony’s PlayStation 4, unveiled in June, will start at $399 when released in the U.S. later this year. While Microsoft’s Xbox One will have a price tag of $499, it includes improved Kinect voice commands and motion sensing, content partnerships with the National Football League and access to Skype video calls.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Takashi Amano in Tokyo at tamano6@bloomberg.net

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

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