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Nintendo profits tumble as Wii U drags on the bottom line

Nintendo profits tumble as Wii U drags on the bottom line

Wed 29 Jan 2014 9:03am GMT / 4:03am EST / 1:03am PST
PublishingDevelopment

But software sales lighten the mood in fiscal nine-month report

Nintendo's nine-month financial results showed an ongoing slide in revenue and profit, though it was a more positive story in terms of software sales.

For the nine-month period ended December 31, 2013, Nintendo earned 499.1 billion ($4.8 billion) in revenue, down 8.1 per cent on the prior year, which was down 2.4 per cent on the year before that. The company's profit showed an even steeper decline, sinking 30 per cent to 10.2 billion ($96.7m). Indeed, were it not for the 48 billion the company recouped in exchange gains at the end of the nine-month period its balance sheet may well have registered a loss.

As expected, the Wii U remained the thorn in Nintendo's side, selling just 2.41 million consoles in a nine-month period that included the holiday sales season. Crucially, that's lower than the 3 million units the console sold in the equivalent period in the prior fiscal year, and Nintendo expects fewer than 400,000 more units to be sold by the end of March, 2014.

In addition, the cost of manufacturing the Wii U hardware and the price-point at which it is sold in the U.S. and Europe means that its sale, "still has a negative impact on Nintendo's profits."

The Wii U has sold 5.86 million units in its lifetime, and that's at least enough to make Nintendo's key releases million-sellers. Super Mario 3D World, The Legend of Zelda: Wind Waker HD and Wii Party U all sold 1 million copies or more by the close of December, with Wii U software selling 16 million units in total.

Somewhat predictably, the happiest news came from the 3DS, which sold 11.65 million units - down on the prior period's 12.7 million total, but enough to make the 3DS one of the most popular platforms in the market.

3DS software sold a combined total of 57.25 million units. Pokemon X & Y was by far the most successful with 11.6 million units sold worldwide, but it was joined in the multi-million club by Animal Crossing: New Leaf with 3.5 million, Mario & Luigi: Dream Team with 2 million, The Legend of Zelda: A Link to the Past with 2.18 million (despite only being released on Nov. 21, 2013) and Tomodachi Collection with 1.8 million.

The 3DS has now sold 42.75 million units worldwide.

5 Comments

Christopher Ingram
Editor-at-Large

52 45 0.9
While it's sad to see the Wii U struggle so very badly - I blame the lack of software that showcases the GamePad's unique functionalities - 42.75 million units shifted for the 3DS is an incredible number that will undoubtedly continue to grow ever larger.

The 3DS is rapidly becoming one of my personal favourite consoles of all-time.

Posted:7 months ago

#1

Kevin Patterson
musician

185 99 0.5
I hope Nintendo bounces back from this by making the next console we all really want. I think it would be a mistake for Nintendo to release a lower powered box again, especially when Apple is supposedly releasing a new AppleTV that plays games, and Amazon is releasing their own Android console as well. I think a console handheld hybrid may be the way to go, a unit that can work as a TV console and a standalone handheld. Dual stick with some great internal hardware and it would sell very well.

Posted:7 months ago

#2

Rick Lopez
Illustrator, Graphic Designer

1,269 941 0.7
Nintendo has lineup on pretty impressive software titles. Graphics arent much differant than PS4 or Xbox. I blame lack of sales due to lack of software. I also blame the lack of 3rd party support on the gap their is in WiiU system specs compared to PS4 and XB1. I just hope that when Nintendo releases its heavy hitters, the WiiU picks up. Because I really like the look of the new games coming for the system, Smash Bros., "X", Bayontta 2... to name a few. And my killer app Fire Emblem is in development and the crossed it with Shin Megami Tensai. Both my altime favorite franchises, so Im super excited...So lets see what happens.Im not hoping WiiU can compete with PS4 or XB1, however I do hope its sales improve enough to make it relevant among them.

Posted:7 months ago

#3

Bruce Everiss
Marketing Consultant

1,692 594 0.4
So. A trading loss of about $300 million.
Obviously they can sustain this for a while with their reserves.
But sooner or later they have to start making profits again, which means making what customers want.
Obviously they have the fantastic brands, by the truck load. But how to monetise them?
If they continue as they are they may well not achieve this.

Frankly they look like a takeover target. There are many companies out there that would be able to monetise the brands better than Nintendo are doing.

Posted:7 months ago

#4
I can't say I agree Bruce. Have a closer look at their financials.

The problem I see with Nintendo is their cost base: they are monetising, and not many games companies can claim $5bn in revenue - from 9 months. But...

- the cost of sales of this $5bn was $3.5bn
- selling and admin expenses was $1.5bn

That right there is the problem for me. Why does it cost them $5bn to post revenues of $5bn? There must be massive scope for cost-cutting. I'd love to see the full breakdown of these figures.

If they can cut costs by 10% - it adds $500m to their bottom line over 9 months.

Two other figures that jump out at me:
- R&D expenses - $430m (this seems hugely below their forecast too, which is interesting).
- Advertsing expenses - $570m (!!!!).

Their cash position has barely budged: and their total assets is up to almost $16bn.

Still - given that R&D + Advertising accounts for only 20% of their cost base ... where is the other 80%?? Manufacturing? Sales? Operations?

Posted:7 months ago

#5

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