http://www.gamasutra.com/php-bin/news_index.php?story=25711

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Big suprise?

30% is a pretty significant drop in profit

So much for the aim low and surprise strategy that is expressed on a weekly basis by forum members. In the end, Nintendo is just a company and certainly not infallible.

Important note. This 30% drop in profit is directly related to the price drop. They cut a fifth of the price on what will be more than 50% of the fy's sales. Somewhere in those numbers we can see exactly how many consoles they plan to sell through the FY.

Original article

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

Not unexpected nintendo would cut profits forecast but 30% seems to high a cut. I guess all will become clear on the 29th.

Assuming they do cut it, I have to wonder how big of a cut it will be. I'm not downplaying the impact that NSMB will have but even with the most outstanding holiday season ever I just don't see them shifting more than 20 million by April. Especially since sales in January-March are probably not going to be as high next year since they said there would be no shortages during the holiday. I'm not bashing the Wii, I'm just being realistic.

It seems that the Wii's price drop was done very sudden and was unplanned, because of this i wouldn't be surprised to see Nintendo cut their profit/revenue forecast by more than 30% (by like say 35% - 40%) in order to make their 4th quarter appear better than it will be.

I'm also curious to see what will happen if DS sales start to decline next year, after all the DS is starting to get a bit old now and its also a substantial part of Nintendo's revenue / profit.

It was expected that their profits would drop, I mean they shaved $50 off each Wii (20% of the price), the yen has been stronger against the dollar, even if they meet projected shipments on hardware and software, they'll still see a drop in profit

Still the fact is they're still making large profits even in this slow sales period.

Some have stated elsewhere that making a mountain instead of a buttload is still a hell of a lot.

But this does show that Nintendo was right sell the Wii at a profit. When the whole company's bottom line is affected by the price cut, there is no way they could release the system on par with the HD systems.

  There is a reason they are the number one company in the world