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Finance

Nintendo cuts full year profit forecasts by 82%

Thu 28 Jul 2011 7:55am GMT / 3:55am EDT / 12:55am PDT
BusinessFinance

Poor 3DS sales and Wii U costs hit Q1 figures

Nintendo has slashed its full-year profit forecasts by 82 per cent to 20 billion ($257 million), compared to its previous estimates of 110 billion.

The extreme cut follows continued disappointing sales of the 3DS handheld console, which for three months ended June 30 sold only 710,000 units worldwide.

The company has announced that it intends to cut the price of the 3DS in Japan, Europe and the US this August.

Net loss for the first quarter was 25.5 billion, with sales at 93.9 billion, down 50 per cent compared to 188.6 billion for the same period last year. The company blamed poor sales, exchange rates and research and development costs for the Wii U.

Aside from respectable sales of The Legend of Zelda: Ocarina of Time 3D, the company acknowledged "few other hit titles" for its new handheld. During the three month period, 4.53 million 3DS games were sold.

The DS series of handhelds sold 1.44 million units and 12.13 million games, while Wii hardware shifted another 1.56 million units and 13.44 million software titles.

13 Comments

Kingman Cheng Illustrator and Animator

954 183 0.2
The 3DS launch was poorly executed, still I didn't expect this big an impact. I sincerely hope they've learnt their lesson. I thought they pledged only in recent years that with the Wii they needed to focus on software more? Thought the 3DS launch would have reflected this with more first party titles ready at launch and what not.

Posted:3 years ago

#1

Lucas Seuren Copy Editor, Only Network

26 2 0.1
Nintendo really is having a very bad year, mostly because of the 3DS. I didn't have high expectations, but this shows that they really didn't plan the launch very well. Share holders can't be happy either, company lost more than 20% of it's value since the launch of the 3DS.

Posted:3 years ago

#2

Caspar Field CEO & Co Founder, Wish Studios Ltd

40 93 2.3
DS and Wii both offered fresh, easy-to-comprehend and interesting ways to interact. The 3DS didn't. It's just not a game-changer - it's not exciting. Wii U is different kettle of fish, but Nintendo needs to sort out its messaging around the system's benefits - fast.

Posted:3 years ago

#3

Stitch Jones News Editor

6 0 0.0
After purchasing the 3DS on launch day for $250. This quick price drop does indeed upset me. I really should have held off, but I have always had a firm confidence with Nintendo. Now it is really shaken.

Posted:3 years ago

#4

Spungo McGee Reviewer

40 44 1.1
"Wii U is different kettle of fish, but Nintendo needs to sort out its messaging around the system's benefits - fast. "

It could start by explaining what the hell it actually is. All my friends are videogame journalists, and not one of us understands it.

Posted:3 years ago

#5

Logan Borsos

9 0 0.0
@Spungo

It's a console that wirelessly projects what's on your TV screen to your controller. It also has the capability to stream different information than what is on the TV to the controller screen (Allowing for say, a hand of cards to be on the controller, while the playing table is on the TV). While a neat idea, I don't see myself holding an Ipad shaped and sized controller for hours on end playing call of duty (or other big title), asking my friends for their 99999 digit long friend code (when they could easily have a name system..), or playing on the historically horrendous Nintendo multiplayer system. Not to mention by the time the Wii U releases Microsoft and Sony will be unveiling their next generation consoles, which I can only imagine will blow it out of the water. (PS Vita sure blew the 3DS out of the water, at least IMO)

I am reminded of SEGA right about now.

Posted:3 years ago

#6

Andrew Goodchild Studying development, Train2Game

1,254 421 0.3
I guess it's not just the sales, but the cut. Nintendo were making a massive profit per system, now it will presumably be a moderate margin. However, if they hadn't been cocky, there was clear indication pre launch that people thought that was too high a price.
On top of that, they can say all they want that they wanted to leave the path clear for third parties at launch, but that is a really bad strategy unless you have a monster hunter exclusive in the wings.
As for the earthquake, I struggle with that as a reason in all but the directly affected areas. Anyone who has had their house damaged or has no work will have more on there mind, but if there was an earthquake in Glasgow, I'd be shocked, sympathetic, but I don't see how it would inform my purchasing decisions. If anything the power conservation drives makes handheld gaming a better option than console gaming.

Posted:3 years ago

#7

Winson Shuen Community Writer

1 0 0.0
It's easy to blame on the 3DS, but selling 4.5 million units in the first four months is no easy feat. In contrast, the original DS sold 5.4 million units in the first four months (but during the holiday season.) So I'm not really understanding how selling 4.5 million units is considered a failure from a financial standpoint. Is it because Nintendo vastly overestimated their revenue forecast?

Posted:3 years ago

#8

Kai Oehler Game Designer

6 1 0.2
>Winson
They did grossly overestimate their revenue forecast, but it's also the consumer perception and the purchase rate decrease. They're not meeting their monthly sales quota.

>Andrew
The earthquake, at least in Japan, has had untold damages on a depressed economy. People simply aren't spending as much, and are opting for cheaper products.

I agree with the Monster Hunter statement, though. The 3rd party lineup was 'weak' in the sense of not having a killer title.

The cocky statement -- I disagree that they were being arrogant, so much as misgauged the consumers' value perception of the hardware. The excitement from E3 '10 vs. launch time fell so drastically.

The company has demonstrated that it can respond quickly to the markets; and their act of contrition to retain the goodwill of early-adopters is illustrative of their attitude of providing value to their customers.

Posted:3 years ago

#9

Andrew Goodchild Studying development, Train2Game

1,254 421 0.3
@kai. The arrogence is that whilst they have every right to make a profit, indications are that the margins were massive. We aren't talking Sony selling an console that people think is expensive but actually is being sold at a loss. Chances are the new price still makes a healthy mark up per unit, meaning Nintendo could have launched at a lower price without taking a loss. But they were sure people would pay whatever they set. That in my eyes was arrogant.

Posted:3 years ago

#10

Kai Oehler Game Designer

6 1 0.2
@Andrew

It's more of a market experiment. No one knows what's going on with the new generation of dedicated handheld consoles, and they wanted to see the consumer response. They just didn't expect it to be this bad. Also, keep in mind, mountains and mountains of R&D fuel these hardware iterations.

In terms of value as a piece of hardware, subjectively it's been worth my $250. But I can see how the layman wouldn't respond well to the original price-point.

Now, I understand the loss-leader strategy, but it goes against Nintendo's principle of making a profit on every item sold. That's not unreasonable -- it's a sustainable business strategy. Nintendo doesn't have other business divisions that can keep them afloat, hence their aggressive stance in seeking large margins.

Now that the market's forcing their hand, Nintendo's changing, and (in many ways, unfortunately) such an era of business is ending. It's certainly exciting as always in the gaming industry :)

Edited 1 times. Last edit by Kai Oehler on 29th July 2011 9:16am

Posted:3 years ago

#11

Blaise Guy Studying Bachelor of Games and Interactive Entertainment, Queensland University of Technology

9 0 0.0
Also keeping in mind the costs of developing a new Console that has a lot of (in my opinion, unfounded) negative hype going for it. R&D on a professional level would take hundreds of thousands of dollars a year, at least, no? Millions? Perhaps their Accounting Analysts didn't think about the lack of new software sales which the original DS would have given them, but the 3DS largely missed out on. They're only just now slowly re-releasing all of their old games (again) in a 3D format, and an almost direct remake of Zelda: OOT is only going to sell so much.

tl;dr - it's not just bad hardware sales, it's also costs of new console development and probably some analyst's original thoughts of "X new handheld consoles sold, Y software units sold" where Y was overestimated drastically.

Hooray for speculation, anyway.

Posted:3 years ago

#12

Spungo McGee Reviewer

40 44 1.1
"It's a console that wirelessly projects what's on your TV screen to your controller. It also has the capability to stream different information than what is on the TV to the controller screen (Allowing for say, a hand of cards to be on the controller, while the playing table is on the TV)."

As I understand it the console will only support one controller per unit, so what's the use of that? I might as well have my cards up on the screen, because there's not going to be anyone I need to hide them from. And what's the point of projecting the TV screen contents to the controller? I've only got one pair of eyes, so I can't look at them both at once, and given the choice I'm clearly going to choose the giant telly over the teeny controller screen.

I still don't get it.

Posted:3 years ago

#13

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