Struggling Nintendo reports quarterly loss, slashes 3DS price
Japan’s Nintendo Thursday reported a first-quarter loss, lowered its annual forecast and slashed the price of its 3DS handheld console by 40 percent less than six months after its launch.
The gaming giant booked a net loss of 25.5 billion yen ($327.9 million) for the April-June quarter and cut its forecast for the year to March 2012 to a net profit of 20 billion yen, down 74.2 percent from the previous year.
Nintendo also said it would slash the price of its 3DS handheld console, released in February, from 25,000 yen to 15,000 yen from August 11 in Japan, to be followed by similar cuts in foreign markets by September.
The 3DS, the world’s first video game console with a 3-D screen that works without special glasses, globally sold 710,000 units and 4.53 million game titles during the period.
Its price will be lowered to generate “momentum” for the device before the key year-end shopping season, Nintendo said.
Meanwhile, the Wii home console sold 1.56 million units, thanks mainly to price cuts in the European and US markets. But the Wii business also suffered from having a limited number of mega hit game titles.
In the first quarter, Kyoto-based Nintendo — which like other game makers faces stiff competition from smart phones and tablet computers — said a limited number of megahit game titles and a soaring yen hurt its earnings.
A surging yen against the dollar, the inventory markdown due to the planned price cuts, global advertisement and promotional costs for the 3DS, plus research and development costs for new products, also weighed on the earnings.
The company lowered its exchange rate projections for the dollar from 83 yen to 80 yen and for the euro from 120 yen to 115 yen. In the first quarter last year, the company valued the dollar at an average of 92 yen.
“These factors considerably decreased profits,” Nintendo said.
Nintendo in June announced a plan to launch a “Wii U” console in 2012, as the global game sector becomes increasingly crowded with competitors.
Traditional gaming rivals such as Sony with its PlayStation and Microsoft with the XBox have been joined in the fray by smartphones and tablet computers, including Apple’s iPhone and iPad.
The existing Wii console has sold 87.6 million units since its 2006 debut, but has seen a steady decline in recent years.
Along with cutting its annual net profit forecast, Nintendo reduced its operating profit projection to 35 billion yen, down 79.5 percent from a year ago. Sales are expected to fall 11.3 percent to 900 billion yen.
“The earnings forecast has been modified to reflect the trends of stronger than expected yen appreciation and sales performance, and the decided price deduction of the Nintendo 3DS hardware, and the sales outlook for the holiday season,” it said.
Nintendo avoided direct damage to its factories and production network by the earthquake and tsunami that hit northern Japan on March 11, but experts have cautioned about the disaster’s impact on consumer confidence.