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Nintendo profit falls 36% on lack of hit games, currency

TOKYO — Nintendo reported a 36 per cent fall in third-quarter profit after a lack of hit game titles hurt holiday sales of its Wii U and 3DS hardware and the absence of currency windfalls that boosted the year earlier.

Nintendo profit falls 36% on lack of hit games, currency

A man stands in front of an advertisement board of Nintendo's Wii U game console software outside an electronics retail store in Tokyo, Japan, Feb 2, 2016. Photo: Reuters

TOKYO — Nintendo reported a 36 per cent fall in third-quarter profit after a lack of hit game titles hurt holiday sales of its Wii U and 3DS hardware and the absence of currency windfalls that boosted the year earlier.

Net income fell to 29.1 billion yen (S$344 million) in the three months to December, the Kyoto-based company reported Tuesday. That compares with the 23 billion yen average of analyst estimates compiled by Bloomberg.

Nintendo relies on software titles to drive demand for machines such as the 3DS handheld player and Wii U. The result comes as the company faces its biggest shakeup since the 1970s, with its first smartphone game Miitomo scheduled to debut next month while work is under way on a new console code-named NX.

“There were simply no hit titles on Wii U and 3DS at the year-end shopping season,” Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities, said prior to the earnings announcement. “There is a lot of attention on Miitomo in March and what it will say about the company’s strategy. Nintendo absolutely needs a new growth driver.”

Nintendo shares rose 33 per cent last year, fueled by its March announcement that the company was entering the smartphone game market and planned to develop titles for mobile devices made by other companies. The stock has gained 2.5 per cent this year with the earnings released after the close of trade on Tuesday.

FORECASTS MAINTAINED

Nintendo stuck to a forecast for Wii U sales to be little changed this fiscal year at 3.4 million units even though hits like Splatoon and Super Mario Maker, which lets players design their own game levels, failed to ignite demand for the console.

Third-quarter unit sales for the Wii U fell 2.1 per cent to 1.87 million, while sales of the 3DS fell 28 per cent to 3.6 million units.

Nintendo maintained its full-year forecasts for operating profit of 50 billion yen on sales of 570 billion yen.

The Kyoto-based company has teamed with DeNA, operator of the Mobage network, to create games and operate new membership services that that may eventually — though not immediately — include applications based on Nintendo’s character lineup of plumbers, gorillas and princesses.

MIITOMO SCHEDULE

While Nintendo owns intellectual property including Mario and Zelda, Miitomo will be a free-to-play messaging-based application. The move represented a reversal of sorts for a company that had resisted jumping aboard the mobile gaming boom. The late Satoru Iwata’s strategy of selling software only for Nintendo devices came under pressure after a consumer shift to mobile gaming eroded demand for the Wii U and 3DS.

Nintendo’s tie-up with DeNA however had a bit of a bumpy start. In October, the company conceded that their jointly created mobile platform wouldn’t debut in 2015 as anticipated, raising doubts about its ability to compete in the fast-moving, competitive market for free-to-play games. Investors now don’t expect the company’s entry into smartphone games to contribute significantly to revenue for several years.

President Tatsumi Kimishima Tuesday said Miitomo will debut next month and the company will use its own intellectual property on a second mobile game. Nintendo is also considering virtual reality, although no specific plans have been developed yet, he said.

Miitomo will feature users’ avatars when communicating with other players and can also ask questions of their owners, including inquiring about their weekend plans. BLOOMBERG

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