Namco Bandai slashes outlook by 54.9 percent

Japanese toy and game powerhouse cuts annual profit forecast by 55 percent due to poor game sales; plans acquisition of Banpresto.

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TOKYO--Namco Bandai Holdings has revised its profit forecast for the current business year, saying game sales had not met expectations. In a statement today, the company said it expects 11 billion yen ($93.9 million) in net income for its fiscal year ending March 31, a 54.9 percent decline from its previous forecast of 24.4 billion yen ($208 million). The company also dropped its sales estimate by 4.3 percent from 470 billion yen ($4.01 billion) to 450 billion yen ($3.87 billion).

At Namco Bandai Holdings' midterm business strategy meeting held today in Tokyo, company president Takeo Takasu explained that Bandai's performance has been steady for the year. However, he said Namco had heavily underperformed in its game software and amusement facility operations, resulting in the major revision for Namco Bandai Holdings.

Takasu explained that Namco failed to adjust its game software operations to meet customer demands. The company fell behind in making titles for the Nintendo DS despite the handheld's record-breaking sales. In the console sector, sales of Namco's top products, including Soul Calibur III (PS2), fell far below figures achieved by their previous releases.

Namco's amusement-facility operations were steady in Asia and Europe, but it saw sluggish performance in Japan due to the record-setting cold weather and snowstorms. In North America, Namco closed down a number of money-losing amusement branches and continued its cost-cutting efforts, but sales were down by 2.5 percent due to hurricanes and low attendance at movie theaters.

Besides its disappointing income, Namco is also taking a one-time loss of 6 billion yen to cover a decline in the value of its game-software inventory. As a result, Namco is expected to suffer a net loss of 2.7 billion yen ($23 million) for FY2005, way down from its previous profit forecast of 8.4 billion yen ($71 million).

By contrast, Bandai has been performing well. Overall, its net profit for the nine-month period ended December 31 was 16.12 billion yen ($137.8 million), up 70 percent from the same period of the previous year. Bandai, however, expects its figures to drop after the fourth quarter, and has revised its annual forecast from 16 billion yen ($136.7 million) to 14.2 billon yen ($119.7 million).

Once Namco Bandai Holdings and Namco Bandai Games go into full operation starting April 1, the new company plans to strengthen its game business. It will expand its line-up of titles oriented towards a more general audience, versus the hardcore gamers it courted with Soul Calibur III. Preparing new business models for next-generation game consoles will also be on the company's agenda, given the higher development costs of Xbox 360 and PlayStation 3 titles. (It remains unclear whether Revolution development costs will be more than that of current-generation consoles.)

Namco Bandai Holdings also plans to buy out Banpresto and turn the company into a wholly owned subsidiary. Bandai is currently Banpresto's top shareholder with a 51 percent stake, and it plans to scoop up the remaining 49 percent at 3,450 yen ($29.47) a share, 26 percent more than its closing price today in Tokyo.

Namco Bandai Holdings also unveiled a three-year goal of raising its sales to 550 billion yen ($4.69 billion, up 18 percent) and operation income to 58 billion yen ($496 million, up 44 percent) by 2008. The company hopes to make 25 percent of its sales from the overseas market by that time.

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