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Friday, January 17, 2014
Nintendo Wii U Sales Keep Falling
Nintendo said on Friday that sales of its Wii U consoles had flopped as the company cannot compete with the home console market dominated by Sony and Microsoft, pushing it to a third consecutive annual loss.
The Japanese company on Friday slashed its global Wii U sales forecast for the year to March 31 by almost 70 percent to 2.8 million units. It cut its sales forecast for its handheld 3DS to 13.5 million units from 18 million.
"In the year-end sales season which constitutes the highest proportion of the annual sales volume, software sales with a relatively high margin were significantly lower than our original forecasts mainly due to the fact that hardware sales did not reach their expected level. As a result, the total of selling, general and administrative
expenses will surpass gross profit, which leads to an operating loss," Nintendo said. "The reason why we will post ordinary income despite the operating loss situation is that we now assume that the yen will be weaker than our original assumptions at the beginning of the fiscal year, which results in foreign exchange gains."
"On the other hand, we expect to post a net loss because we need to reverse deferred tax assets in relation to the losses carried over from the previous fiscal years mainly in the United States, as we can no longer expect our financial performance to recover in the current fiscal year. Exchange rate assumptions for the fourth financial quarter as well as for the end of the full fiscal year have been revised from 90 yen to 100 yen per U.S. dollar, and from 120 yen to 140 yen per euro in consideration of
the recent exchange rate situation," the company added.
Nintendo this business year expects an operating loss of 35 billion yen ($335.76 million) compared with an initial forecast for a 100 billion yen profit.
"We failed to reach our target for hardware sales during the year-end, when revenues are the highest," said Nintendo's president, Satoru Iwata.
The content of Nintendo is losing its appeal as titles were delayed, casual gamers migrate to mobile devices, and hardcore players opt for the faster Sony PlayStation 4 and Microsoft Xbox One. The owner of Pokemon and Donkey Kong also refuses to offer games with its characters on mobile devices.
"We are thinking about a new business structure," Iwata said at a press conference today in Osaka, Japan. "Given the expansion of smart devices, we are naturally studying how smart devices can be used to grow the game-player business. It?s not as simple as enabling Mario to move on a smartphone."
Nintendo on Friday also warned of a net loss of 25 billion yen for the year ending on March 31, a substantial reversal from its prior projection of a 55 billion yen profit. It now expects revenues of 590 billion yen, down 36 percent from its prior forecast. It cut its full-year dividend to 100 yen from 260 yen.