UH-OH! I'M READY FOR EVERYONE'S APOLOGY! LOOKS LIKE COMMON SENSE > FANBOYSARE YOU READY FOR THAT $100 PRICE DROP BY YEAR'S END? I AM!http://online.wsj.co...0108154866.htmlNintendo Slashes Outlook As Wii U Sales Disappoint
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slashed its sales outlook in the wake of disappointing holiday demand for its new Wii U videogame console, which it had been banking on to rekindle consumer excitement.
The Wii U was Nintendo's first new home videogame console in six years. The machine was launched in November with hopes that its controller, equipped with a six-inch, touch-screen display, would enable a new type of game play and counter the industry shift to games played on smartphones.
The revised sales view is the latest dose of bad news for Nintendo, coming off its first annual loss in more than three decades, after a sluggish start to its previous hardware launch, the Nintendo 3DS hand-held, pushed the company into an early price cut.
The Kyoto-based videogame company lowered its full-year sales outlook for a second straight quarter. Nintendo cut its projection by 17% to ¥670 billion ($7.39 billion) for the fiscal year to March.
Nintendo said the "lower than expected sales outlook" was based on its performance in the year-end sales season and afterward. A poor holiday performance is devastating for Nintendo as the company generates more revenue in that single three-month period to December than it does in the other three quarters combined.
"The business isn't firing on all cylinders. It had a bad Christmas," said David Gibson, a Tokyo-based senior analyst at Macquarie Securities. "We thought it was going to be bad, but this is even worse," said Mr. Gibson, who has an "underperform" rating on Nintendo shares.
Nintendo's struggles aren't limited to a single product. It cut its full-year sales projections for all of its hardware products and software titles. But the most dramatic outlook cut came for its newest system, the Wii U.
Initial demand for the Wii U appears soft. Nintendo sold 3.06 million units of the Wii U in the three months to December. Nintendo cut its Wii U sales target to four million units by the end of March from an earlier expectation for sales of 5.5 million units. It also cut Wii U software sales forecasts by a third to 16 million units.
The Wii U represents Nintendo's attempt to extend the life of the videogame industry's traditional business model—selling dedicated game consoles and software limited to that machine—at a time when the smartphones and tablet computers are opening the floodgates for inexpensive or free-to-play titles for a wide range of devices.
Macquarie Securities' Mr. Gibson said Nintendo may be forced to resort to drastic measures to spur interest in the Wii U, such as a price cut and accelerated introductions of popular game franchises. The playing field is also expected to grow more crowded by the end of the year as the industry braces for the debut of successors to Sony
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PlayStation 3 and Microsoft
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Xbox 360. Neither company has made any official announcements regarding a replacement for their current home consoles.
Bloomberg News A woman holds a Nintendo Wii U touch-screen controller.
Despite the outlook, Nintendo said it returned to profit in the first nine months of its fiscal year, aided by a weaker yen and lower production costs for its Nintendo 3DS hand-held game machine.
Nintendo said it swung to a net profit of ¥14.54 billion for the nine months to December, from a year-earlier loss of ¥48.35 billion. Revenue fell 2.4% to ¥543.03 billion.
While Nintendo doesn't break out quarterly results, Nintendo turned profitable in the important holiday quarter after two straight quarters in the red, calculated by subtracting the previously announced six-months results from its latest nine-month earnings.
For the current fiscal year to March, Nintendo now expects an operating loss of ¥20 billion, compared with an earlier projection for an operating profit of ¥20 billion. The company raised its net profit outlook to ¥14 billion from an earlier ¥6 billion forecast because of the weaker yen.
The Japanese currency has fallen sharply against both the dollar and euro since mid-November. Nintendo keeps most if its cash in foreign currencies, so a weaker yen inflates paper gains on its reserves, while a stronger yen leads to losses in the value of those foreign holdings. Nintendo said it incurred a ¥22.2 billion gain from yen depreciation.
Nintendo revised its foreign-exchange rate expectations for the rest of the fiscal year. It now sees the dollar at ¥90 and the euro at ¥120.
The industry's changing landscape is also hurting sales of Nintendo's 3DS. The company is trying to script a comeback for the 3DS, which was forced to slash prices in 2011 shortly after a disappointing launch. The company worked to lower the manufacturing costs for the hand-held in order to meet the device's reduced price. It said it halted losses from the 3DS in the fall.
Nintendo cut its 3DS sales projections. It is aiming for sales of 15 million units for the year to March, down from an October estimate of 17.5 million units. It also cut software sales targets by nearly 30% to 50 million units.