Nintendo slashes profit forecast

  • By Hirohiko Niizumi, GameSpot
  • Posted Jan 26, 2005 12:27 pm PT

Sales double and DS units are selling briskly, but DS games, GameCube consoles, and exhange rates have faltered.

TOKYO--Nintendo has cut its profit forecast for the fiscal year by 22.2 percent, from 90 billion yen ($872 million) to 70 billion yen ($679 million), according to its third-quarter financial report, which was released yesterday. Profits were off 43 percent in the third quarter alone. However, company officials said sales have doubled since 2003 and sales of the DS handheld (now at 2.84 million units worldwide) are higher than expected.

Nintendo raised its yearly DS sales predictions from 5 million to 6 million, but dropped forecasted game sales from 15 million to 10 million after software titles failed to move as briskly as anticipated. Company officials said that the decision to make the DS backwards-compatible with Game Boy Advance titles has resulted in a weaker demand for DS titles.

The preinstalled PictoChat software is also hurting overall numbers. "DS software is not selling because users are playing the preinstalled PictoChat game," Nintendo's senior managing director Yoshihiro Mori said during an interview with Reuters. "Even if they buy a game, multiple players can use it to play against each other, eliminating the need for each to buy his or her own game."

GameCube sales have been slow. The forecast calls for sales of 4 million units rather than the original estimate of 4.5 million. Predictions for GC game sales held steady at 45 million units for the year. Likewise, GBA sales forecasts remain at 16 million units--of which 15 million will be the SP model--and at 77 million games.

Nintendo added that the dollar-to-yen exchange rate has hurt its overall numbers. The company owns about $54 million worth of assets in American dollars, but that's been affected by an exchange-rate slide from 110 yen per dollar to 105 yen per dollar.

According to analysts with Reuters Estimates, Nintendo will post an operating profit of 120 billion yen ($1.16 billion) and a net profit of 74.2 billion yen ($720 million) at year's end. Shares in Nintendo dropped 2.3 percent (270 yen ($2.62)) following the release of the report. Nintendo's fiscal year ends March 31.

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