After Nintendo Co. had announced it expects a 25 billion-yen annual loss due to weak interest towards its Wii U, Satoru Iwata, who is the President of the company, explained that Nintendo has taken a new business model under consideration.
Nintendos share price underwent a record decrease in the U.S. in more than 12 years. It had forecast a profit estimated to 55 billion yen for 2013, because it relied on the Wii U console sold during the holiday season.
However, the company felt forced to cut its expectations for the Wii U console sales from 9 million to 2.8 million units, and for Wii U game sales from 38 million to 19 million units. Nintendo also cut its forecast for operating income from a 100 million yen profit to a 35 billion-yen loss. The forecasts for its 3DS player sales were trimmed to 13.5 million from 18 million, and the companys 3DS games sales projections were cut to 66 million units, down from 80 million.
The companys President Satoru Iwata explained in a press conference: “We are thinking about a new business structure. Given the expansion of smart devices, we are naturally studying how smart devices can be used to grow the game-player business. Its not as simple as enabling Mario to move on a smartphone.”
In October, the Japan-based video-game machines maker announced a quarterly loss estimated to 8 billion yen, after reducing the price of its console in order to make it more attractive and face the competition of Sony Corp. and Microsoft Corp., Nintendo is also trying to steal some customers, who prefer playing games on their mobile devices, from Apple Inc. and Samsung Electronics Co.
It seems that Nintendos family-focused content becomes less attractive for consumers, mostly because some of the titles are being delayed, more and more casual gamers start using their mobile devices, and hardcore players prefer Sonys PlayStation 4 and Microsofts Xbox One. Nintendo also limited online players increasing demand by the fact it refused to launch games with its characters on mobile devices.
Currently, the company, and President Iwata in particular, is facing increased pressure due to analysts expectations. The Chief Fund Manager of Ichiyoshi Asset Management Co. – Mitsushige Akino, said, cited by Bloomberg: “The video-game maker has moved into smartphones and tablets. Nintendo needs to expand from their current hardware business model. Its a structural problem.”
Eighty percent of the companys market value has been lost after the successful introduction of the original Wii, which managed to increase Nintendos share value to a record 72,100 yen in November 2007. A great number of analysts say the situation is due to the revisions, and Yusuke Tsunoda, who is one of the analysts working for Tokay Tokyo Securities Co. said in a telephone conversation: “The revision is much worse than expected. Its going to be a third consecutive annual operating loss and that raises a serious management issue.”
Nintendo Co Ltds current share price is JPY13 475, down 6.15%, and its one-year return rate is up 47.81%.
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