Nintendo facing first profit slip in six years - AP

Publisher projects income will fall from $2.96B to $2.44B for just-ended 12-month fiscal period, its first year-over-year decline since the Wii launched in 2006.

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Nintendo was a dominant force in 2008, on both the console and the handheld fronts. However, thanks to declining demand of its hardware and strong growth of the yen, the publisher has not been able to maintain that performance. In January, Nintendo said sales for the first nine months of its full fiscal year (which runs April 1, 2009 to March 31, 2010), were down 23.1 percent to ¥1.18 trillion ($12.5 billion), while profits slipped 9.4 percent to ¥192.6 billion ($2.04 billion).

Nintendo hopes that a new color will spur Wii demand in the Americas.
Nintendo hopes that a new color will spur Wii demand in the Americas.

Today, the Associated Press reports that Nintendo does not expect to have closed that gap during its January-March quarter, equating to the first drop in profit for the publisher in six years. The decline would also be the first since Nintendo launched its game-changing juggernaut Wii in November 2006, after languishing in last place with the GameCube during the previous console generation.

Having posted a record ¥279.1 billion ($2.96 billion) during its fiscal year ended March 2009, Nintendo has forecast a ¥230 billion ($2.44 billion) profit for the just-ended reporting period. The AP did not indicate Nintendo's expected revenue take for the year. The publisher is expected to announce its full-year performance on Thursday, May 6.

Nintendo's earnings were particularly hurt by sluggish demand for both hardware and software. In January, the publisher said that its DS sales from April to December fell from 25.62 million units to 23.35 million units, while software dropped off from 163.77 million units to 121.38. A similar trend was seen on the Wii, where console sales declined from 20.5 million to 17.05 million and software slipped from 163.79 million units to 156.64 million units during the nine-month period.

One other factor cutting into Nintendo's bottom line is the publisher's worldwide price cut for the Wii. In September, the publisher cut the price from $250 to $200 in the US, from €250 to €200 in the EU, and from ¥25,000 to ¥20,000 in Japan. The cut was the first made to the Wii since the console launched in 2006.

Speaking to the AP, Nomura Securities analyst Yuta Sakurai believes Nintendo's projections for the soon-to-be-announced earnings report are on the conservative side. "We are expecting the results to be better than the company forecasts for the Wii," Sakurai said. "Christmas shopping was strong."

Just this week, Nintendo announced its latest scheme to spur demand for the Wii. On May 9, the publisher will begin offering the console in a new black color, to complement the white edition currently available. Both consoles will also begin shipping with a copy of both Wii Sports and its 2009 sequel, Wii Sports Resort, as well as a Wii Remote, a Nunchuk, and the MotionPlus motion-sensing-enhancing add-on. The hardware-software bundle will retain the current $200 price tag.

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