Nintendo Forecasts Profit Surge as New Games Drive Wii U

Nintendo Co., the world’s biggest maker of video-game machines, forecast a surge in profit as the yen slides and the company accelerates new game releases to drive sales of Wii U consoles and 3DS hand-held players.

Net income will rise to 55 billion yen ($553 million) in the 12 months ending March 31 from 7.1 billion yen a year earlier, the “Super Mario” creator said yesterday in a statement. The forecast compares with the 50.8 billion-yen average of 19 analyst estimates compiled by Bloomberg.

A weaker yen, which resulted in a 39.5 billion-yen gain last year, is helping Nintendo weather lower-than-expected sales of the Wii U amid a shift in gaming to smartphones and tablets. President Satoru Iwata plans new titles for the console and is adding top-selling Japanese games for the 3DS including “Animal Crossing: New Leaf” to global markets.

“The key is game software,” said Takashi Oka, an analyst at TIW Inc. in Tokyo who rates the stock neutral, or hold. “The 3DS and Wii U will sell well if Nintendo provides titles, since not everyone plays games on smartphones and tablets.”

Nintendo climbed 4.6 percent to close at 11,950 yen in Osaka trading yesterday before the earnings announcement. The Kyoto-based company has gained 30 percent this year, compared with a 33 percent surge in Japan’s benchmark Nikkei 225 Stock Average. The shares gained as much as 5 percent in Frankfurt trading after the earnings release. American depository receipts rose 1.1 percent to $14.66.

Iwata expects to sell 9 million Wii U consoles in the 12 months ending March, compared with 3.45 million sold last fiscal year. The 53-year-old forecast 3DS sales of 18 million, up from 13.95 million last year.

Target Affirmed

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.

The company doesn’t plan to cut the Wii U’s price to drive sales, Iwata said in Osaka yesterday.

“Sales momentum is improving in Europe and the U.S.,” Iwata said. “We’re preparing to introduce software seamlessly throughout the year.”

Nintendo reiterated a 100 billion yen full-year operating profit target, compared with a 36.4 billion yen loss for the year ended March 31. The company will probably post a profit of 70 billion yen this year, according to the average of 19 analyst projections compiled by Bloomberg.

Software Delay

A weaker Japanese currency is boosting the repatriated value of overseas earnings for the nation’s exporters. The yen has depreciated about 13 percent against the U.S. dollar this year, touching a four-year low of 99.95 on April 11, while weakening about 12 percent against the euro.

The Wii U failed to meet sales targets amid a delay of software releases, Iwata said yesterday. The release of “Pikmin 3” in Japan was delayed to July from this spring, according to company announcements. “Game & Wario” was pushed back to March 28 from the beginning of the year.

“We seem to always end up with a lack of software in the beginning when we introduce a new platform,” Iwata said. “That’s a big regret.”

Nintendo will face tougher competition this year from rival console makers in a market that’s shrinking amid the shift to mobile devices.

Sony Corp. said in February that it will release a PlayStation 4 before the year-end holiday season, its first upgrade in seven years. Microsoft Corp. said yesterday that it will introduce the successor to its Xbox 360 at an event in May.

“It’s unclear whether Nintendo can sell the 3DS and Wii U as it plans,” said Satoshi Yuzaki, general manager at Takagi Securities Co. in Tokyo. “The 3DS and Wii U lack the power of appeal.”

U.S. retail sales of video-game hardware, software and accessories fell 10 percent from a year earlier to $992.5 million last month, according to NPD Group Inc. Hardware sales fell the most, declining 32 percent, the Port Washington, New York-based research firm said April 18.

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