Nintendo counts on holiday sales to meet forecasts

TOKYO — Nintendo is counting on a blowout Christmas shopping season for sales of its Wii U game console to meet its full-year forecasts.

Nintendo, which posted a net loss of $81 million in the three months ended Sept. 30, this week maintained its projection to sell 9 million Wii U units and 18 million 3DS devices in the full fiscal year. That means it needs to move nearly 20 times as many consoles in the second half than it sold in the first.

Nintendo cut the U.S. price for its flagship machine last month as President Satoru Iwata tries to lure consumers who prefer playing games on tablet computers and smartphones including Apple Inc.’s iPhone. Even with new titles including “Pikmin 3,” the creator of the Mario and Zelda franchises failed to capitalize on U.S. video-game product sales that jumped by almost a third last month, even before Sony Corp. and Microsoft Corp. release their updated consoles.

“If Nintendo’s software does not sell well in the second half, then it could lead to a management capability issue,” said Hideki Yasuda, a Tokyo-based analyst at Ace Research Institute. “The company will have a hard time in this year-end shopping season.”

Pressure is building on Iwata to fulfill his pledge to deliver 100 billion yen in operating profit for the current fiscal year, a forecast he affirmed this week. The company had an operating loss of 23 billion yen during the first half.

Nintendo sold 460,000 Wii U units in the six months ended September, about 5 percent of its annual target of 9 million. The company’s 3DS sales totaled 3.89 million during the half, about 22 percent of its full-year target of 18 million.

“Whether we can meet the target we committed to hinges on how year-end business will go,” Iwata saidy. “We expect Wii U to take off going forward when titles are prepared.”

The Wii U features a tablet-like, 6.2-inch touchscreen controller that lets players connect wirelessly to the console and shift the display between the device and a television. The updated console competes in a market where smartphone sales are on track to exceed 1 billion units this year, researcher IDC said Oct. 29.

“Nintendo struggled to create titles that can fully tell users the uniqueness of the tablet controller,” said Eiji Maeda, an analyst at SMBC Nikko Securities Inc. in Tokyo. “Nintendo hasn’t been able to come up with any notable innovations in the past years that can match the success of its Wii.”

The earnings are cushioned by a weaker yen that boosts the repatriated value of overseas earnings at Nintendo, which makes about 70 percent of its annual revenue overseas. The yen depreciated about 4 percent against the U.S. dollar in the six months ended Sept. 30.

Nintendo has lost more than 80 percent of its market value since shares reached a high of 72,100 yen in November 2007, after the introduction of the original Wii, according to data compiled by Bloomberg. Its market capitalization is about $16.2 billion – less than Samsung Electronics Co.’s planned capital expenditures this year.

The 3DS titles “Pokemon X” and “Pokemon Y” that were launched Oct. 12 sold more than 4 million units worldwide during their first two days on the market, the company said Oct. 15.

Sony expects to sell 5 million units of its upcoming PlayStation 4 from its introduction next month through March, Andrew House, the head of Sony’s game operations, said last month.

Nintendo said it is releasing new titles this quarter, including “Wii Party U,” “Wii Fit U” and “Super Mario 3D World.”

“The problem of Nintendo is how it can attract consumers toward its product when the market is shifting toward mobile devices,” said Masamitsu Ohki, a fund manager at Stats Investment Management Co. in Tokyo.

The Wii U’s price in the U.S. was cut by $50 to $299.99 on Sept. 20, while the Japanese price remained a suggested 30,000 yen. Sony plans to introduce the PS4 at $399 next month, while Microsoft is set to release the Xbox One for $499 a week later.

Nintendo introduced the 2DS portable machine, resembling a tablet, this month for $129.99 in an effort to lure first-time and casual gamers.

“It would have been better to simply cut the price of the 3DS than introduce the 2DS, which didn’t even create any buzz,” SMBC Nikko’s Maeda said.

The 3DS was Japan’s best-selling gaming device in September with sales of 749,398 units, according to market researcher Enterbrain Inc. Sony’s PlayStation Vita sold 34,695 units in the same period, Tokyo-based Enterbrain said this week.

The global video-game market will reach $93 billion this year, up from $79 billion last year, researcher Gartner Inc. said Oct. 29. Sales may total $111 billion by 2015.

Mobile games are the fastest-growing segment, with revenue set to reach $22 billion by 2015 from $13.2 billion this year, Gartner said.

Nintendo said earlier this month it will soon halt production of the Wii gaming console for Japan, the only major market where its new machine outsells the seven-year-old device. There are no plans to end output for markets outside Japan, Yasuhiro Minagawa, a spokesman for the company, said Oct. 2.

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