Nintendo Slashes Financial Outlook as Sales Slump

Hit by a drop in demand for its Wii console and DS handheld, Nintendo slashed its half- and full-year financial forecasts on Wednesday, and also cut hardware shipment targets.

The company cut its net profit outlook for the period from April 2010 to March 2011 by more than half to ¥90 billion (US$1.1 billion) and said it expects net sales to be 21 percent lower than originally forecast at ¥1.1 trillion.

The revised figures represent big drops on the results it achieved in the prior financial year. For that period it achieved a net profit of ¥229 billion and net sales of ¥1.4 trillion.

Nintendo had been hoping to sell 30 million DS handhelds and 18 million Wii consoles, but has cut those targets to 23.5 million and 17.5 million respectively.

Figures for the first half of the fiscal year, the period from April to September, are worse. Nintendo is forecasting a 34 percent drop in sales and a drop into the red. It expects to record a net loss of ¥2 billion.

Part of the blame for the lower forecasts lies with the strong Japanese yen, the company said. The currency has surged in value in the last few months, making Japanese goods more expensive overseas and reducing the value of profits made in other countries when they are transferred back to Japanese yen.

Nintendo set its previous targets based on an exchange rate of ¥95 to the U.S. dollar, but on Wednesday the yen was trading at around ¥84 to the dollar.

The announcement was made separately but simultaneously with a splashy news conference where the company disclosed launch plans for its 3DS handheld. The 3DS can display images with the illusion of depth but doesn't require the user to wear special glasses.

Industry figures speculated that the 3DS would be launched in November, but Nintendo said it will go on sale in Japan on February 26 and in Europe, Australia and the U.S. in March. Nintendo's financial year ends on the last day of March, so the schedule means the 3DS will have a limited impact on Nintendo's financial results for the current year.

Nintendo said it hopes to sell 4 million of the new handheld along with 15 million software titles in the roughly one month between its launch and the end of March.

Martyn Williams covers Japan and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is martyn_williams@idg.com

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