Nintendo Forecasts Miss Estimates on Lower Wii Sales (Update3)

   Date:2010/05/07     Source:

May 6 (Bloomberg) -- Nintendo Co., the world’s largest maker of video-game players, forecast profit will fall more than analysts estimated as sales of the company’s motion-sensing Wii console decline for a second year.

Net income will probably drop 13 percent to 200 billion yen ($2.1 billion) in the 12 months ending March 2011, after declining 18 percent a year earlier, the Kyoto-based company said in a statement today. The outlook missed the 220.9 billion yen average of 21 analyst estimates compiled by Bloomberg.

Nintendo projected the number of Wii consoles sold will drop 12 percent, overshadowing an increase in portable DS player sales, as the company faces mounting competition from Sony Corp., Microsoft Corp. and Apple Inc. President Satoru Iwata plans to introduce a 3-D model of the handheld DS and a heart-rate- tracking “Vitality Sensor” accessory for the Wii this fiscal year to revive earnings growth.

“Investors are pinning their hopes on the 3-D DS,” said Mitsushige Akino, who counts Nintendo shares amid the $450 million he oversees at Ichiyoshi Investment Management Co. in Tokyo. “The numbers are below the consensus so it’s not hugely positive, but it’s not reason enough to sell.”

Nintendo, which fell 3.3 percent to close at 30,650 yen in Osaka trading before the announcement, said it plans a dividend payment of 830 yen a share for this fiscal year, down from 930 yen a share last year. The stock has risen 39 percent this year, outperforming the 1.4 percent advance by the benchmark Nikkei 225 Stock Average.

Missing Estimates

Operating profit, or sales minus the cost of goods sold and administrative expenses, will probably fall 10 percent to 320 billion yen as revenue declines 2.4 percent to 1.4 trillion yen, the company said. Those forecasts compare with the average analyst estimates for 349.1 billion yen in operating income and 1.39 trillion yen in revenue.

Sales of the Wii will probably slide to 18 million units, after declining for the first time last fiscal year, Nintendo said. Sales of the DS handheld will rise 11 percent to 30 million from 27.1 million, the company said.

Yusuke Tsunoda, an analyst at Tokai Tokyo Securities Co., forecast in a March 24 report that sales of the Wii would probably fall 5 percent to 20 million units this fiscal year, while DS sales may decline 2.4 percent to 27 million units.

Nintendo faces more competition than when it began sales of the Wii in 2006 and was the only major producer of motion- sensing personal gaming machines. Sony and Microsoft are now planning to introduce their own motion-sensing accessories for their video-game consoles, while Apple’s iPhone and iPad machines are being increasingly used for gaming.

U.S. Market

U.S. consumers bought 9.6 million Wii units in 2009, more than combined sales of Sony’s PlayStation 3 and Microsoft’s Xbox 360, according to researcher NPD Group Inc. The DS handheld outsold Sony’s PlayStation Portable by more than 4 to 1 with 11.2 million units in the period, NPD said.

Nintendo, which accounted for 7 of the top 10 games sold in the U.S. last year, today forecast software sales for the Wii to fall 14 percent to 165 million units and sales of DS titles to decline about 1 percent to 150 million. The company said it will introduce a new installment of the top-seller “Super Mario Galaxy” this year.

Nintendo in March said the 3DS handheld, going on sale this fiscal year, will allow users to see 3-D images without the need for special glasses. The device will be the company’s biggest portable product introduction since 2004, Nintendo of America President Reggie Fils-Aime said in an interview last month.

DS Overhaul

Fils-Aime likened the 3DS’s debut to when Nintendo transitioned from the Game Boy to the dual-, touch-screen DS, saying the company’s announcements at the E3 trade show in Los Angeles in June will focus on the player. Since their introduction in November 2004, DS player sales have exceeded 125 million, according to Nintendo’s website. Game Boy, the company’s first handheld platform, was released in 1989 and has sold more than 200 million units.

“The new 3DS will create a new opportunity for us,” Iwata said today.

Apple’s touch-screen iPad, which can be used to play games, surf the Internet, watch movies and read books, sold 1 million units in a month after its release in the U.S. on April 3, Apple said earlier this month. More than 7 million iPads may be sold globally in the first year, according to El Segundo, California- based researcher iSuppli Corp.

Apple, based in Cupertino, California, expects combined sales of the iPhone and iPod Touch to reach 100 million units by summer, Chief Executive Officer Steve Jobs said last month. Both devices allow users to download games, media and software programs.

3-D Adoption

Sony, which has said it will update its software to allow PlayStation 3 machines to run games in 3-D, plans to start selling game titles as well as Bravia televisions capable of showing the format in June. PS3 users will have to wear special glasses to play 3-D games, the company said.

The Tokyo-based company, whose PlayStation 2 player dominated the previous generation of game consoles, is also introducing its “Move” motion-sensing controller for the PS3 to appeal to casual users and narrow Nintendo’s lead.

The black controller, resembling Wii’s wand with a colored ball at the top, was shown in March at the Game Developers Conference in San Francisco. It will cost less than $100 including a sensor-camera and game, Peter Dille, senior vice president for marketing for Sony Computer Entertainment in the U.S., said at the time.

The company forecast the euro will weaken to 120 against the yen this fiscal year from 131.15 the previous year. The dollar will probably strengthen to 95 against the Japanese currency from 92.85, Nintendo said.

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