APRIL 27, 2012 ● Nintendo Co. Ltd. reported its first ever Nintendo operating loss, ¥37.3 billion ($460 million) for the fiscal year ending March 31. Although its Wii system has been a big hit in recent years past, the move by consumers to embrace smartphones and tablets as mobile game devices has hit the gamemaker’s business. Instead of selling 13 million Wiis Last year as originally expected, Nintendo saw only 9.8 million sold. Similarly, 13.5 million 3DS devices eventually were sold by retailers instead of 16 million. Last August, the 3DS list price was dropped by a third to spur sales, which also reduced revenue. Nintendo is still marketing the earlier DS handheld, yet consumers only bought around 5.5 million of them, not the 11 million originally projected.
Impact: Clearly when you need to put a major effort into developing an expensive new product like the Wii U and you also need to cut prices on your new mobile device it is going to put a major hurt on profitability. The 3DS has actually done pretty well. We always thought Nintendo’s forecasts were too high. We do not ever see the 3DS having the sales of the DS and Nintendo must adjust accordingly. We think that the biggest issue was Nintendo’s early announcement of the Wii U which probably only served to seriously dampen Wii sales while at the same time giving the competition a very early peak into their strategy. If the Wii U is a hit the operating loss will be quickly forgotten.
