JUNE 11, 2011 • The Nikkei business daily reported that Nintendo summer bonuses to its employees will be cut by 20% this year as a result of poor performance that culminated in the company’s first annual operating loss of ¥37.3 billion ($470 million). Japanese workers typically receive bonuses in summer and winter. But in the Japanese system, these payments are really deferred salary rather than actual bonuses – salary that can be reduced or eliminated entirely depending on company or employee performance.
Impact: This is just one of many signs of tough times at Nintendo. Unlike many companies in the video game space, Nintendo, despite its ups and downs, has been a consistently profitable company. This makes the current losses more alarming to shareholders. Nintendo investors have certain expectations and are not tolerant of losing money. In the short term, there is no danger of Nintendo going out of business. The company has a large war chest of assets including substantial cash in the bank. Long term, Nintendo faces many strategic issues, however, not too much should be read into these short term cuts. This is a company that focuses very much on the bottom line and that is clearly what is going on here.
