Times online (by way of Gonintendo)

http://business.timesonline.co.uk/tol/business/markets/japan/article5610164.ece

Leo Lewis, Asia Business Correspondent

Nintendo, the maker of the Wii games console and the favourite safe-haven share on the Tokyo stock exchange, has stunned the market with a 33 per cent cut to its full-year profit forecasts.

Analysts described Nintendo’s guidance as a “baffling and potentially very worrying” sign for worldwide sales of the Wii as recession curtails household spending around the world.

The company itself said that it expected to sell one million fewer Wii units by the end of 2008 than it had previously expected.

Although the company will, in contrast with other Japanese consumer electronics makers, finish the year substantially in the black, the company said that it likely would close the current financial year ending March 31 with net income of about Y230 billion (£1.8 billion), not the Y345 billion that it had been predicting when it spoke to the market in October.  

Nintendo’s results in the third-quarter — the period covering the run-up to Christmas in the United States and Europe — were strong: operating profits were 21 per cent higher than during the same period the previous year.

“Today’s revision suggests that the roaring pace of Wii growth that we’ve seen until now may be over,” Hiroshi Kamide, a KBC Financial Products analyst, said.

“The numbers also imply that we are going to see a sudden collapse in the fourth quarter from record margins to some of the thinnest margins Nintendo has experienced for three years.”

Mr Kamide, who had been the only major analyst with a “sell” recommendation on Nintendo, said that, given how much the company speaks to retailers around the world, the downgrade could imply that “they know something big has gone wrong, and that people are not buying the machines”.

Part of the problem, according to games industry insiders in Japan and the UK, is that the pipeline of “must-have” Nintendo Wii software is less strong now than it was six months ago.

On the most widely read gaming websites, there are few forthcoming Wii titles generating the sort of excitement that preceded the release of Mario Galaxy or Smash Brothers.

One big source of margin destruction has been the soaring yen, which rose 24 per cent against the dollar and 30 per cent against the euro in 2008.

UPDATE

US based analysts disagree.

Arvind Bhatia with Stern Agee was also less alarmed as Kamide in his assessment. "We do not necessarily view the reduction in forecast as a negative given Nintendo has been increasing its forecast all year.

"Rather, we think supply constraints during the holiday season resulted in Nintendo losing sales and management is now factoring this in its revised forecast. We note that Wii hardware was out of stock in the US in late December/early January.

http://www.edge-online.com/news/wiis-roaring-growth-over