Flagging GameCube hobbles Nintendo profits

Though Microsoft loses money on each of its current- and next-generation consoles, its rival Nintendo makes a point of profiting from its hardware. So when sales of the GameCube suffer, so does the company's bottom line, as shown in Nintendo's latest six-month annual report.

For the six months ending September 30, 2005, the company saw net income of 36.6 billion yen ($308 million), a 21-percent slump compared to the same period in 2004. While net sales fell just 6.2 percent to 176.3 billion yen ($1.4 billion), operating income plummeted 51 percent, going from 40 billion yen ($336 million) to just 19.6 billion yen ($165 million).

Slacking GameCube sales were a major contributor in Nintendo's flagging fortunes. From April to September 2005, the company saw only 8.5 billion yen ($71.5 million) in console sales, just over half of the 16.1 billion yen ($135 million) it had in the same period in 2004. The figure was dwarfed by Nintendo's 74.9 billion yen ($630 million) in handheld income for the six months, up from 61.3 billion yen ($512 millon) during the same period in 2004.

Nintendo blamed dismal GameCube sales on the fin de siecle of the current generation of consoles. "The market for the current generation of console hardware is becoming saturated and is approaching a transitional phase to next-generation consoles," read its report. "As a result, the overall video game market generally showed a declining tendency."

Strangely, Nintendo's handheld software sales suffered a year-on-year decline, falling from 65.1 billion yen ($548 million) to 59.1 billion yen ($497 million). Console software saw a less precipitous slump than console hardware, dropping from 26.7 billion yen ($224 million) to 20.7 billion yen ($174 million).