Nintendo Forecasts: What downturn?

In April, analysts were down on Nintendo because the company appeared to be losing steam. For one, Nintendo’s financial forecasts suggested that, this year, the company would not match the stellar growth of the past couple of years. Was it the credit crunch and the spectre of an economic downturn? Was the portable Nintendo DS console in need of a makeover? Was the novelty of the Wii’s motion-sensing controller that had won over so many non-gamers and game programmers tapering off?

At ease, worrywarts. Nintendo just revised upward its financial forecasts for the fiscal first-half through September and year through March 2009, and the gains aren’t trivial.

The company now expects operating profit to jump 34% to 650 billion yen ($5.96 billion) on a 20% gain in sales to 2 trillion yen ($18.3 billion), vs. last year, and it estimated that the annual dividend payout would be 1,680 yen ($15.40), up 22% from an earlier forecast. Its previous predictions were for a 8.8% rise in operating profit and a 7.6% uptick in sales.

Powering the gains were better-than-expected sales of both the Wii and DS, and favorable foreign currency swings, the company said. That prompted Nintendo to revise upward its forecasts for gaming hardware and software unit shipments to:

April Forecast August Forecast DS hardware: 28 million 30.5 million DS software: 187 million 197 million

Wii hardware: 25 million 26.5 million Wii software: 177 million 186 million

The most recent monthly sales figures for the U.S. and Japan show Nintendo is still way ahead of the competition. Sony's PlayStation 3 seems to have the best shot at closing the gap. Sony now has a video download service and will soon unveil Home, its 3-D virtual online world. It's also just announced a new PlayStation Portable, PSP 3000, which goes on sale in October and adds even more features, such as a better screen and built-in mic for free Net-based phone calls via Skype.

Rumor has it that Nintendo is working on a new version of the DS and it's also looking to extend the utility of the current DS Lite, which was launched in March 2006. No details yet but you can bet that, with the year-end holiday season approaching, the airwaves, billboards and Net will be cluttered with videogame ads.

Before it's here, it's on the Bloomberg Terminal.