So I have thought long and hard about Nintendo's current predicament. Starting yesterday when analysts suggested Nintendo had lost 1.3 billion USD. I began wondering how that was possible and analysts said something like 60% was likely attributed to exchange rate between the Yen and other global currencies including most specifically the US dollar.

Today I read that the losses weren't as bad as initially predicted. But I also read in an article that around 80% of Nintendo's losses are actually a result of the exchange rate and not actually bad business practices. Nintendo can't control the Japanese economy they can't devalue the currency.

So I have been trying to think of ways Nintendo could circumvent the exchange rate. I don't have a business degree so I really don't know if that is possible but if the Yen continues to strengthen Nintendo is powerless to do anything, even if they increase sales by another 50% or so they will still be barely turning a profit.

A theory I thought of but not sure if its legal or even possible since I don't know too much about business. I know Nintendo's traded in Japan on the Tokyo Stock Exchange but to my knowledge the company is not publicly traded elsewhere. Could Nintendo benefit from cross listing? Or what about Dual Listing? I'm not 100% sure how the stock market works but if Nintendo Of America kept the US funds in its branch thus not needing to exchange the currency could they not cut down the losses?

Would cross listing or Dual listing actually help Nintendo circumvent the exchange rate? In the end Nintendo is bleeding money due to the high yen, can anyone think of a way that Nintendo could circumvent the exchange rate to lower their losses?

Nintendo is not in a position to be a hedger of currencies because:

1. it already exports is production to low wage countries
2. They deal with low margin equipment

A lot of companies in industries that make sense would hedge like P&G and IBM because they deal with raw input costs that are normally derived in dollars, but there are always risks.

Currency hedges work both ways, if you are on the right side of the hedge then you make out like a bandit but if you are on the wrong side then you and your management team look like fools.

That's the cost of doing business, that is why its included as part of its earnings report card

And Nintendo business is deteriorating, if it wasn't, they would not be revising everything. That's not a currency problem. They should be worrying about how to get back to its mid wii days as opposed to trying to alter currencies to make their business look good.

Nothing to worry about. They'll bounce back next year.
Everything sort of went the wrong way for them this year, that even Reggie is a liability to Nintendo this year.

Thanks for your input. Anybody else have any ideas how Nintendo could lessen the blow or find a way around the strong Yen?

Also yah if 80% of Nintendo's losses are attributed directly to the Yen then they are not doing as horrible as it looks. I wouldn't say they aren't deteriorating because we all know they are. But 3DS has now sold more then the origional DS did at this same point in time during its life span. Hardware sales are way up, the problem is the hardware is selling at a loss but Nintendo has stated that they aren't losing much on every unit. A major other reason is while hardware sales are threw the roof software sales are dropping. Without software sales to make up for the hardware loss Nintendo is going to lose money.

But market share wise and Nintendo's ability to sell there products appears to be back on track. The loss of money on each unit was necessary to bring 3DS in line with DS. The lack of software sales is also not entirely Nintendo's fault, third parties were supposed to continue launching software on a regular basis during this time frame. But third parties got scared and jumped ship (I'm talking about you UbiSoft) this wasn't Nintendo's fault entirely.

In the end I don't doubt Nintendo is trying really hard to lower costs and regain profitability. I also don't think they can be held responsible for most of their losses. 80% of those losses had nothing to do with Nintendo's performance, there is nothing Nintendo could have done to prevent these losses. Then I'd suspect about another 5-7% at least is due to 3rd party publishers and their in ability to sell software, with the 3DS numbers there is no reason that these publishers should not be releasing new great software every month. Then the remaining 13-15% is soully Nintendo's fault.

But judging from the numbers I am fairly optimistic. I mean PS3 lost Sony over 2-billion dollars in its first year on the market 2007. If Nintendo only loses 200-mill launch year I'd say they are not in trouble at all, I suspect next year 3DS will become profitable and WiiU will lose Nintendo some money. But I'd fully expect Nintendo to turn everything around by 2013 if the Yen doesn't continue to grow this fast!

They were worse than expected.  Nikkei was talking about pre-tax ordinary income, not net income.  They lost 107.872 billion yen in ordinary income.

the point of this question was not how bad are they doing, but how might they stabalize themselves, unless I am mistaken. and in answer to that question, and the aforementioned ideas about hedging against a declining dollar; I am an investment advisor and when a company sees losses primarily due to currency they can only do two things, either weather the storm and wait for it tolevel out, or split into seperate economic entities based in each country. in some cases doing this saves stress and allows the US and Japan based halves of the company to flourish. In this case, however, it would only put further hardships on Nintendo as licensing , materials contracts, and the like would have to be redrawn for a US based nintendo. I would say they are trying to wade through the ecenomic crises in the world and let things settle down before releasing small ticket games in mass. I agree that the 3DS and WiiU are going to give temporary losses, but this is all part of the plan, and within a few months of international stability, we will see a heavy increase in the outflow of high quality games.

An ungracious end to a winning generation at just the wrong time for the global currency markets is their issue. They needed to have more games to support Wii on the back end, despite the fact that the drain on software resources is due to the need to develop the Wii U, or else they'll just have the same initial problems with Wii U that they did with 3DS

The root of all Nintendo's ills is their lack of development resources. They need more games covering more bases. Better Wii sales could have floated them through this tough time, but as it stands they'd trade better Wii sales now for a cruddy Wii U launch window, which could do more long-term damage if the console gets off to a slow start

This has not been a good year for Nintendo games in Japan.  Right now they are down 13.4 million versus all of last year.  They would need to come close to doubling their best November/December ever in order to be up YoY.

Overall software shipments in Japan for the first half of their fiscal year.

DS down 9.12 million (12.51 to 3.39)

Wii down 1.23 million (4.6 to 3.37)

3DS at 1.83 million for the half.

Not sure what you mean by they are selling "more than the other three".  There is a pretty good chance that Sony will ship more hardware than them.  They did for the first quarter of the fiscal year.  Even with the 3DS and the price cut they've shipped 2.66 million fewer pieces of hardware versus the six months ended Sept. 2010.  Without the 3DS, the Wii and DS would be down 5.73 million YoY.

Make games, games, games and more games.