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Originally published Tuesday, December 3, 2013 at 6:57 PM

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Nintendo’s outlook dims as rivals’ console sales soar

Nintendo’s family-focused content is losing its appeal as titles were delayed, casual gamers migrate to smartphones and tablets, and hard-core players opt for faster Sony and Microsoft machines.


Bloomberg News

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TOKYO — Nintendo’s prospects for meeting its profit and sales forecasts for this year are diminishing after Sony and Microsoft each sold more game consoles in 24 hours than the Wii U maker did in nine months.

Nintendo’s family-focused content is losing its appeal as titles were delayed, casual gamers migrate to smartphones and tablets, and hard-core players opt for faster Sony and Microsoft machines.

The world’s biggest maker of video-game machines, with U.S. headquarters in Redmond, also refuses to offer games with its lineup of iconic characters such as Mario and Zelda on mobile devices, limiting its ability to profit from surging demand by online players.

President Satoru Iwata vowed in October he would meet a forecast for $973 million in full-year operating profit and 9 million units in Wii U sales.

Analysts are skeptical, with the average estimate for profit at $557 million and for sales at 6.2 million units.

“They steadfastly refuse to consider that the product is not interesting to consumers,” said Michael Pachter, a Los Angeles-based analyst with Wedbush Securities. “They will fail to hit 9 million, and they will likely miss their profit goals.”

Pachter forecasts sales of 6 million units.

The Kyoto, Japan-based home of the Pokémon and Donkey Kong franchises is counting on new versions of “Super Mario Bros.” and “The Legend of Zelda” to bolster sales of the Wii U and portable 3DS during Christmas. It already cut the suggested price of the Wii U by $50 to $299.99 in the U.S. and introduced an entry-level 2DS portable player for $129.99.

The company partnered with Southwest Airlines during the holiday season and distributed free Wii U machines to more than 100 passengers flying from New Orleans to Dallas on Nov. 26.

Those moves may not be enough to make up lost ground, as the company sold just 460,000 Wii U machines in the six months ended Sept.  30, about 5 percent of its target for the fiscal year.

Nintendo reported a net loss of $78 million in the quarter ended Sept. 30, saying Wii U hardware “still has a negative impact on Nintendo’s profits.”

“Wii U has become a game console only for Nintendo fans,” said Eiji Maeda, an analyst at SMBC Nikko Securities in Tokyo. “Wii U needs groundbreaking software to draw casual and hard-core gamers.”

The company will sell 6.5 million Wii U machines this fiscal year, Maeda said.

Shares of Nintendo have lost 82 percent of their value since November 2007, according to Bloomberg data.

The Wii U features a tabletlike, 6.2-inch touch-screen controller that lets players connect wirelessly to the console and shift the display between the device and a television. In the nine months from January through September, the company sold 850,000 — fewer than Sony and Microsoft did during the first day their new consoles were released.

Wii U software isn’t faring much better. Nintendo sold 6.3 million console games from April through September, meaning it has to sell almost 32 million more during the second half of the fiscal year to meet its forecast.

Nintendo’s home-console sales are stagnating even as U.S. demand for video games is increasing. U.S. sales of both physical and digitally delivered games grew 17 percent in the three months ended in September, researcher NPD Group said on Nov. 21.

“The launch of other video-game systems is also good for us because they energize the video-game industry as a whole,” Iwata told analysts and investors Oct. 31. “This year, what Nintendo is promoting is, conversely, to stand out in the game industry for individuality.”

Microsoft said it sold more than 1 million Xbox One units during the first day the machine went on sale in 13 countries on Nov. 22. On Tuesday, it said it’s selling every Xbox One player it can make, 11 days after introducing the new game console. Users have already spent more than 50 million hours on games and entertainment, Microsoft said.

PlayStation and Xbox consoles are better for playing online games like “Call of Duty” and “Halo” and offer better links to Internet-based entertainment services, said Greg Woods, 50, of Grand Rapids, Mich.

“The Wii U just doesn’t have the games the other boxes have. Until I can get a Wii U at a much lower price, my next purchase will be a PS4 or Xbox One for myself and my kids.”

Sony and Microsoft’s launches further erode Nintendo’s share of a market it once dominated. The company posted operating and net losses in the year ended March 31, 2012, for the first time since going public in 1962.

“It’s going to be difficult for Nintendo to sell 9 million Wii U consoles this fiscal year,” Maeda said. “Iwata needs to plan what to do next year if the performance this year isn’t good.”



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