Nintendo Cuts Profit Forecast Despite Improving Sales
October 24, 2012

Nintendo Cuts Profit Forecast Despite Improving Sales

Lee Rannals for — Your Universe Online

Nintendo has cut its profit forecast for the year by about a third, backtracking now by saying it anticipates profits of $250 million rather than $438 million.

The Japanese company downgraded its forecast despite figures showing an improvement in operating losses.

Annual sales of Nintendo's 3DS handheld player will be 17.5 million units, which is a 5.4 percent decrease than what was previously estimated. Nintendo also lowered its forecast for 3DS software sales 4.1 percent.

Retail sales of video-game hardware, software and accessories in the U.S. fell 24 percent last month from a year earlier, according to NPD Group's October 11 report.

The company's handheld gaming device faces stiffer competition with the rise of tablet computers and smartphones.

“Consumers are content to use their smartphones and tablet computers to play games,” Makoto Kikuchi, chief executive officer at Myojo Asset Management Japan Co, told Bloomberg. “The 3DS is really failing.”

Apple has sold more than 100 million iPads since the device was introduced in January 2010, and just yesterday it unveiled a new iPad Mini device that could be yet another competitor in the gaming industry's eyes.

Nintendo Chief Executive Officer Satoru Iwata told reporters that they have to focus on making games that are different from what smartphones or tablets are able to do in order to survive.

Nintendo is getting ready to launch its new Wii U gaming console, which goes on sale November 18 for a base price of $299. The new gaming console not only has the motion control that made the original Wii so popular, but it also has a handheld remote with a built-in screen.

Nintendo said in a statement that it plans to sell 5.5 million Wii U consoles this fiscal year, and that it will be sold at a loss.

“Manufacturing costs are expensive, and we priced the machine at a level customers would accept,” Iwata said at the press conference. “It´s important for us to develop a healthy business next fiscal year by combining sales of hardware and software.”

The Wii U is getting a leg-up on competition by releasing before Sony and Microsoft's upcoming gaming consoles.