April 25 (Bloomberg) -- Nintendo Co., the world’s biggest maker of video-game consoles, will sell a new version of its best-selling Wii model next year after profit fell to a seven-year low on competition with Sony Corp. and Microsoft Corp.
Net income slumped 66 percent to 77.6 billion yen ($946 million) in the year ended in March, the Kyoto-based company said today. The earnings, Nintendo’s forecast for a 42 percent jump in profit this fiscal year and predictions for operating profit and sales, all lagged behind analysts’ estimates.
“The market reaction is likely to be negative, because the profit outlook fell short of the consensus,” said Yusuke Tsunoda, an analyst at Tokai Tokyo Securities Co. “Sales of Wii software are forecast to plunge, while at the same time the company’s outlook is probably also taking into account a price cut for the console.”
President Satoru Iwata, facing mounting competition from Sony’s PlayStation 3 and Microsoft’s Xbox 360, needs the second-generation Wii to rekindle the success of its top-selling console that was introduced in 2006. That will be the second major product in a year from Nintendo, which in February began sales of the 3DS model, capable of beaming images in three dimensions.
Shares of Nintendo rose 0.9 percent to close at 20,330 yen on the Osaka Securities Exchange prior to the announcement of the earnings. The Nikkei 225 Stock Average lost 0.1 percent. The stock has retreated 15 percent this year compared with a 16 percent drop for Sony and a 8.6 percent decline for Microsoft.
Nintendo forecast net income of 110 billion yen in the year ending in March, missing the 143.8 billion yen average of nine analysts’ estimates compiled by Bloomberg. The projection doesn’t include sales of the new Wii, which will be shown at the E3 Expo in Los Angeles in June, Nintendo said.
Sales of the Wii will probably drop 14 percent to 13 million units this fiscal year, whiles software sales may plunge 30 percent to 120 million units, the company said.
“We would like to propose a new approach to home video game consoles” with the Wii successor, Iwata said, without elaborating. “It’s difficult to make 3-D images a key feature, because 3-D televisions haven’t obtained wide acceptance yet.”
The company today said it expects to sell 16 million units of the 3DS this fiscal year, compared with 3.61 million a year earlier. Sales of software titles for the handheld will probably climb to 62 million units, from 9.4 million in the year just ended. The 3DS game lineup will also include a “Legend of Zelda” title that will become available in June, Iwata said.
“The outlook for 3DS hardware and software sales is very aggressive,” Tsunoda said. “The company will need a very strong lineup of original titles to meet these goals.”
Operating profit, or sales minus the cost of goods sold and administrative expenses, will climb 2.3 percent to 175 billion yen in the period, after falling 52 percent in the year just ended, the company said. Revenue will probably grow 8.4 percent to 1.1 trillion yen, after a 29 percent drop, Nintendo said. The analysts expected 222.5 billion yen in operating income on 1.12 trillion yen in sales.
Nintendo, which dominated game hardware in consoles with the Wii and in portable players since the Gameboy in 1989, seeks to defend its lead against Sony’s latest PSP.
The $250 3DS, which went on sales in the U.S., Europe in Japan in the past two months, also faces Apple Inc.’s iPhone and smartphones using Google Inc.’s Android software, which have attracted gamers with third-party applications.
Nintendo Vs Sony
Sony, the world’s second-largest maker of portable game players, in January said it will offer the new model of the PSP by the year-end holiday season. The device, code-named NGP, will offer access to third-generation wireless networks and have front and rear touch pads, it said.
Sony, whose PlayStation player dominated the previous generation of game consoles, also introduced its motion-sensing controller, called Move, for the PlayStation 3 to appeal to casual users. The black controller, resembling Wii’s wand with a colored ball in front, went on sale in the U.S. in September for $50, or $80 with a companion product.
In November, Microsoft Corp. introduced its Kinect motion-sensing controller with a free game for $150. The Redmond, Washington-based company last month said it sold 10 million Kinect sensors.
Nintendo sold almost 440,000 units of the 3DS handheld game player during its first week of U.S. sales in late March. Combined with three older models, Nintendo sold 860,000 DS units in March, Nintendo of America President Reggie Fils-Aime said earlier this month, citing figures from industry tracker NPD Group Inc. A year ago, Nintendo sold 701,000 DS handhelds.
The company missed its 4 million 3DS players sales target for the year just ended because of last month’s earthquake and tsunami in northern Japan, Iwata said.
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