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Nintendo May Forecast First Profit Drop in Six Years
Oct. 20 (Bloomberg) -- Nintendo Co., the world’s largest maker of video-game players, may cut its earnings forecast and say annual profit will decline for the first time in six years because of falling Wii console sales and the stronger yen.
Net income at Nintendo will probably fall 11 percent to 249.3 billion yen ($2.7 billion) this fiscal year, the first drop since the 12 months ended March 2004, according to the median of 10 analyst estimates compiled by Bloomberg since the Kyoto, Japan-based company cut the Wii’s price on Sept. 24. Nintendo is scheduled to report earnings on Oct. 29.
“Nintendo may cut its profit projection about 30 percent because of sluggish sales in the first half, the price cut for the Wii and currency-related impact,” Satoru Kikuchi, an analyst at Deutsche Bank AG in Tokyo, said by phone today. “Investors are expecting the company to fully reflect its business environment in its forecast.”
Nintendo, forecasting 300 billion yen net income this year, was the last of the three major game-console makers to cut prices as the hardware manufacturers bowed to calls from publishers and retailers for cheaper machines to reverse an industry slump. In the quarter ended June 30, global sales of the Wii fell for the first time, while Tokyo-based Sony Corp. sold the fewest number of PlayStation 3 machines in two years.
PS3 Outsells Wii
Sony’s PS3 outsold the Wii in the U.S., the world’s largest video-game market, for the first time last month, researcher NPD Group Inc. said in an e-mail yesterday. Japan sales of the PS3 beat those of the Wii for the first time on a monthly basis in September, according to market researcher Enterbrain Inc.
Nintendo added 0.8 percent to close at 24,200 yen in Osaka trading, narrowing its decline this year to 28 percent. Japan’s benchmark Nikkei 225 Stock Average has gained 17 percent so far this year. Sony fell 0.2 percent in Tokyo.
U.S. sales of Sony’s PS3 more than doubled to 491,800 last month, while those of the Wii fell 33 percent to 462,800, Port Washington, New York-based NPD said yesterday. Microsoft Corp.’s Xbox 360 sales gained 1.6 percent to 352,600.
With Nintendo’s slide, game hardware sales in the U.S. fell 6 percent to $472.3 million in September. Overall industry revenue including software and accessories rose 1 percent to $1.28 billion, ending six consecutive months of decline. Wedbush Morgan Securities analyst Michael Pachter expected software sales to be up 21 percent.
Last Bad News
“Bad news will be exhausted with a large downward revision” of Nintendo’s earnings forecast, Soichiro Fukuda, an analyst at Citigroup Inc. in Tokyo, wrote in an Oct. 8 report. The analyst expects that to come “soon” and cut his projection for Nintendo’s profit this year 29 percent to 201 billion yen.
The stronger yen may also reduce the value of Nintendo’s overseas sales, deposits and other assets in foreign currencies. Masahiro Ono, a Tokyo-based analyst at Morgan Stanley, raised his projection for Nintendo’s currency-related loss to 37 billion yen from 23 billion yen in a report Oct. 5.
The yen gained about 10 percent to 89.7 against the dollar in the six months ended Sept. 30. Nintendo, which predicts net income of 300 billion yen this year, calculated the forecast using a projection that the yen will trade at an average 100 per dollar, according to its May statement.
Source: Bloomberg
