Nintendo posts annual profit as Wii U sales up, but outlook weakens

May 7, 2015
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 Nintendo posts $97 mn quarterly net loss on higher costs/AFP
Nintendo posts $97 mn quarterly net loss on higher costs/AFP

, TOKYO, May 7- Nintendo said Thursday it had swung back into the black thanks to a weak yen and stronger Wii U console sales, but the Japanese videogame giant warned its bottom line would shrink this year.

The ‘Super Mario’ creator reported a 41.8 billion yen ($350 million) net profit for the fiscal year to March — reversing a 23.2 billion yen loss a year ago — but revenue slipped 3.8 percent to 549.8 billion yen.

It also forecasted a lower 35 billion yen net profit this fiscal year, although operating profit was set to double, the firm said.

The Kyoto-based company hopes to offset weakening demand for its 3DS portable game system with plans to jump into the booming smartphone games market — a long awaited departure from its consoles only policy.

“A new source of revenue is expected from a gaming application for smart devices which will be released this year,” Nintendo said Thursday.

A sharp drop in the yen has also helped make Japanese exporters such as Nintendo more competitive overseas while it inflates the value of their repatriated profits.

But the one time industry titan has long been criticised for its refusal to license some of its iconic brands for use on mobile applications.

In March, Nintendo unveiled plans to buy a stake in Tokyo based mobile gaming company DeNA as part of a deal to develop smartphone games based on Nintendo’s host of popular characters.

“We’re focusing on whether Nintendo can successfully launch its new smartphone games service with DeNA — that could be a profit driver in the second half (of this fiscal year),” said Toyo Securities analyst Eiji Sato.

“‘Super Mario’ and other characters are Nintendo’s precious assets so we want to see how they can capitalise on them.”

 

– Fierce competition –

 

However, Sato warned that the gains from the yen’s decline were fading, while it was not clear if Nintendo and DeNA would be a good fit.

“It’s not so easy for two companies with different cultures to work together,” he said.

In the last fiscal year, Nintendo sold 3.38 million units of its Wii U console, against 2.72 million units in the year earlier period, while sales of game software rose nearly 30 percent.

The firm pointed to the release of two hit titles, ‘Mario Kart 8’ and ‘Super Smash Bros’, for helping boost demand.

“These titles continued to perform well especially overseas, and the global sales of the ‘Wii U’ hardware and software reached 3.38 million and 24.40 million units respectively,” it added.

The relatively strong results come as Nintendo moves past three straight years of operating losses.

Last year, president Satoru Iwata said he would slash his salary in half for several months to atone for the downturn at the maker of the Donkey Kong and Pokemon franchises, which has struggled as rivals Sony and Microsoft outpaced it in console sales.

All three companies are also fighting off the trend toward cheap — or sometimes free  downloadable games for smartphones and other mobile devices.

Nintendo’s chief had argued that venturing into the overpopulated world of smartphones and tablets risked hollowing out the core business and cannibalising the hard fought value of their game creations.

But Iwata later acknowledged Nintendo had to move into new areas.

“The world is changing, so any company that is not coping with the change will fall into decline,” he said when the DeNA investment was announced this year.

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