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October 24, 2012

It's Good News and Bad News as Nintendo Checks Its Forecast

By Steve Anderson, Contributing TMCnet Writer

Nintendo investors got a pastiche of good and bad news alike just hours ago as Nintendo brought out the numbers in the midst of earnings season: while the losses for the first half of the fiscal year weren't as bad as expected, Nintendo is also dialing back its sales and profit forecasts for the full year. What is perhaps most disturbing about that particular point, is that this is just ahead of the launch of Nintendo's foray into the next-gen market with the Wii U.

Nintendo didn't break down its results into quarters, but did report the first half of the year, putting up a downright staggering 28 billion yen--$350 million U.S.--loss for the first six months. That's a much lower loss than a year ago, when they posted a 70 billion yen--$877.52 million U.S.--following a major price drop on the Nintendo 3DS.

Image via Shutterstock

Nintendo is suffering heavy losses at the hands of smartphones and similar devices, which are offering a robust mobile gaming experience in the form of a device that people already commonly have on hand as they travel anyway, much in the same way that dedicated digital cameras suffered at the hands of smartphones with cameras on the rear. While the rise of mobile gaming has hurt all the gaming companies, Sony and Microsoft (News - Alert) included, Nintendo's focus on the casual gamer has exposed it to somewhat more damage since mobile gaming deeply targets casual players. Since gamers are often either free or inexpensive on mobile devices--and are significantly higher priced on mobile systems like the DS--this is a move that spells trouble for Nintendo.

As a result, Nintendo dropped its profit forecast for the full year down from 20 billion yen--around $250 billion U.S.--to just six billion yen, or right around $75 million U.S., thanks to a combination of suffering mobile sales and a rising yen, which has hurt export sales, a huge part of Nintendo's bottom line. The sales forecast, meanwhile, saw a slight cut to just 810 billion yen--around $10.15 billion U.S.--from 820 billion yen, around $10.28 billion U.S., driven by the release of the Wii U but harmed by declining DS and associated games sales, as well as a drop-off in original Wii sales.

Of course, this move has prompted many to wonder why Nintendo doesn't take its massive library of intellectual property, jammed full of iconic characters from Mario to Link and beyond, and simply start developing mobile titles. Getting out of hardware and becoming more of a game developer might be a big help for Big N, and they could still carry on with the console front, especially if the Wii U generates the kind of numbers they're hoping for. Mobile gaming may have changed, and smart companies will change along with it, but hopefully Nintendo will catch on to this concept themselves.

Edited by Brooke Neuman
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