Nintendo's first-half earnings sink, but outlook stays steady

Sluggish GameCube sales cause 6.9 percent drop in earnings, but a weak yen causes company to stick to its profit forecast.

With the race for next-generation supremacy about to kick off, it's pretty clear who won, placed, and showed among the current consoles. Sony got the gold, with nearly 90 million PlayStation 2 units sold worldwide, with Microsoft grabbing the silver by selling 22 million Xboxes. Taking home the bronze is Nintendo's GameCube, which has sold between 15 and 17 million units, depending on the estimate.

Cooling interest in the GameCube was cited as the main culprit for today's disappointing earnings report from Nintendo. For the six months ending September 30, the company's revenue dropped 6.9 percent to 175 billion yen ($1.53 billion), compared with 188 billion yen ($1.65 billion) a year earlier. The figure is also well below the company's previous forecast of 190 billion yen ($1.67 billion).

Yoshihiro Mori, Nintendo's senior managing director, cited sinking demand for the GameCube as the major factor in the earnings dip. "The big drop for GameCube games was in North America. ... It looks like the product's life is nearing its end," Mori told a news conference in Osaka. The company admitted it sold 60 percent fewer GameCube games than during the same period a year ago.

According to industry research group NPD Funworld, between February's Resident Evil 4 and August's Madden NFL 06, not a single GameCube game cracked the top 20 console games in the US. "GameCube sales have been falling 40 percent year-on-year in the US,'' Amir Anvarzadeh, director of Japanese equity sales at KBC Financial Products in London, told the Bloomberg news service. "You could argue it's one of the worst-performing consoles.''

However, just because Nintendo isn't making as much money doesn't mean it's not making money. Net income--aka profit--for the six-month period was 36 billion yen ($316 million), way above the 19 billion yen ($167 million) estimate in May but lower than the 46.4 billion yen ($407 million) a year earlier.

Why the big windfall? Thank the exchange rate. Nintendo had predicted the US dollar to be worth 107 yen during the six-month period. Instead it traded at 113.2, which has caused the company to say it will still hit its profit forecast of 75 billion yen ($658.8 billion) for its full fiscal year, which ends in March 2006.

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