Shares dropped the most since September after sluggish sales of the console triggered Nintendo’s third loss in the past four quarters as gamers continue their exodus to smartphones and rival players from Sony Corp. (6758) and Microsoft Corp. (MSFT) Nintendo lost 9.9 billion yen ($97 million) in the three months ended June 30.
Mario Kart 8 and a lineup of figurines that interact with games are part of the company’s strategy to keep the Wii U competitive against the PlayStation and Xbox. Nintendo also is struggling with an accelerating shift toward mobile gaming and questions from investors about President Satoru Iwata, who is recovering from surgery.
“Nintendo is a very large ship and one or two hits cannot easily move its dial,” Amir Anvarzadeh, manager of Japanese equity sales at BGC Partners Inc. in Singapore, said in an e-mail. “Thanks to thousands of free games being offered on smartphone platforms and its home console likely to continue to struggle, we see no recovery prospect for the business.”
The company sold just 510,000 Wii U consoles in the first three months and maintained its forecast to sell 3.6 million units this fiscal year. Gamers have bought more PlayStation 4 consoles than Wii U’s, even though the Nintendo machine has been out a year longer.
“Even if Mario Kart sells well it’s extremely difficult for Nintendo to be a stable, profitable company,” said Yasuaki Kogure, chief investment officer at Tokyo’s SBI Asset Management Co.
Sales in the quarter fell to 74.7 billion yen, and the maker of the 3DS handheld player posted an operating loss of 9.5 billion yen. The Kyoto, Japan-based company maintained its forecast for a profit of 20 billion yen and operating profit of 40 billion yen this fiscal year.
Mario Kart 8, in which players can drive a Daimler AG (DAI) Mercedes-Benz, has sold more than 885,000 physical and digital units in the U.S. since its May release.
Nintendo also sold 820,000 units of the 3DS player in the quarter, down from 1.4 million a year earlier.
Iwata, 54, underwent surgery to remove a bile-duct growth, he said in a June 24 letter to investors. He missed the company’s annual shareholder meeting and the E3 trade show in Los Angeles.
Iwata said he had resumed work by e-mail and “other means.”
“Iwata is recovering steadily,” Yasuhiro Minagawa, a spokesman for Nintendo, said by phone. “There is no interference with his business as president.”
The company can’t make important decisions because of Iwata’s absence, Kogure said.
By next year, Nintendo plans to introduce several new titles, including Splatoon, which lets two teams take on roles as squids that morph into people and shoot different-colored ink in timed matches. It will release a new Zelda game, a title called Xenoblade Chronicles X and a Mario racing game that lets users make their own courses.
“It is difficult for Nintendo to generate a lot of benefit from the Wii U,” Hideki Yasuda, a Tokyo-based analyst at Ace Research Institute, said by phone. “Nintendo has to put up with it for several years and needs to wait for the next console.”
Nintendo will release two Pokemon games for the 3DS and Captain Toad: Treasure Tracker for the Wii U in time for the holiday shopping season.
The company is also entering the multibillion-dollar, collectible-toy market with its Amiibo figurines, which are similar to Activision Blizzard Inc.’s Skylanders. Players can enter a Nintendo character into a game through the Wii U’s GamePad tablet.
About 10 Amiibos will be sold for use in Super Smash Bros., with more coming by year-end, Nintendo America President Reggie Fils-Aime said in June.
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