Nintendo Posts Wider Quarterly Loss, Delays Pokemon Go Plus

Do Nintendo Shares Have Further to Fall?
  • Currency impact weighed on Nintendo’s income from overseas
  • Game maker keeps its profit outlook for fiscal year intact

Nintendo Co. delayed the release of a key accessory for the hit Pokemon Go game as the company posted a wider-than-projected loss amid weak demand for its Wii U consoles and a stronger yen.

The net loss was 24.5 billion yen ($232 million) for the three months through June, the Kyoto-based company said in a statement Wednesday. That compares with the prediction for a 3.4 billion yen loss, the average of analysts’ estimates compiled by Bloomberg. Nintendo kept its 35 billion yen profit outlook for the fiscal year, and its shares fell 10 percent in German trading.

Nintendo’s struggle to find new buyers for its traditional consoles and handheld players has been overshadowed by the runaway success of Pokemon Go, released this month by developers it partly owns. Even though the company is trying to reinvent itself in mobile games, the uncertainty over how much it will benefit from the hit has whipsawed the company’s shares since the app’s launch. Compounding those struggles, the game’s developers announced just before the earnings release that Pokemon Go Plus, a clip-on accessory for the hit game, will go on sale in September instead of this week.

“The market’s focus is shifting from the near-term earnings and toward Pokemon Go,” Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities Co., said before the release.

In a report last week, Mitsubishi UFJ Morgan Stanley Securities Co. estimated the Pokemon Go Plus accessory will generate 45 billion yen in sales and add 8.2 billion yen to Nintendo’s bottom line in the current fiscal year, based on its original sale date.

The yen has rallied against the U.S. dollar, cutting the value of overseas sales. Nintendo which gets more than three-quarters of revenue abroad, kept its its yen forecast for the current fiscal year at 110 yen to the dollar and 125 yen per euro. The negative impact of the stronger currency was 35 billion yen, Nintendo said.

The current fiscal year marks the biggest test yet to Nintendo’s ambitions in mobile gaming. After resisting smartphones for years, it plans to release five titles through March 2017, including two by the end of this year.

Unlike the upcoming titles, Pokemon Go was developed by San Francisco-based Niantic Inc., with some input from Nintendo. While excitement over the game’s popularity at one point more the doubled Nintendo’s market value, shares have since corrected as the company pared back expectations, saying financial impact will be "limited."

Roughly 13 percent of Pokemon Go sales should flow to Nintendo, according to an estimate by David Gibson, an analyst at Macquarie Securities in Tokyo. Details of the game’s financial contribution should become clearer next quarter when the company announces results for the period since Pokemon Go’s release.

Besides the foray into smartphones, Nintendo is also planning to launch a new console -- dubbed NX -- in March 2017. It did not provide new details or forecasts for the platform. It maintained sales forecasts for its existing Wii U console at 800,000 units, and 5 million shipments for the mobile handset 3DS. Revenue from the hardware fell 44 percent to 25.1 billion yen, while sales of software for the platforms declined 22 percent to 34.9 billion yen.

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