Nintendo Shocks Market With Profit Warning - InformationWeek
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1/29/2009
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Nintendo Shocks Market With Profit Warning

One factor may have been that there were no new blockbuster games for the Wii in the second half of last year, which would have helped to boost sales.

Nintendo, which has led the video-game console market with its hot-selling Wii, shocked industry watchers Thursday by reporting that profits for 2008 would be 33% less than expected.

The Japanese company, which trades on the Tokyo stock exchange, gave no clear reason for the warning, other than saying in a company statement that there was a "softness in the Japanese consumer market."

Analysts told The Times of Britain that the forecast was "baffling and potentially very worrying" in that it could be a bad omen for worldwide sales of the Wii in the current economic recession.

Hiroshi Kamide, a KBC Financial Products analyst, told the newspaper that given how much Nintendo talks to retailers globally, the warning could imply that "they know something big has gone wrong, and that people are not buying the machines."

Nintendo reported that net profits for the fiscal year ending March 31 would be 230 billion yen, or $2.6 billion. The company in October had forecast profits of 345 billion yen, or $3.85 billion.

Despite the downgrade, Nintendo said it expected net sales and operating profit for the year to increase 8.8% and 8.7%, respectively.

Nintendo revenue and profits have been hurt by the strength of the yen, which rose 24% against the U.S. dollar and 30% against the euro last year. In addition, there were no new blockbuster games for the Wii in the second half of last year, which would have helped to boost sales.

Nintendo has led the video-game console market in terms of unit sales. In November, which marks the start of the all-important holiday shopping season, the Wii outsold Microsoft's Xbox 360 by a margin of almost 3-to-1, or 2.04 million units versus 836,000, according to the NPD Group. Sony's PlayStation 3 ranked a distant third, with shipments of just 378,000 units.

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