Nintendo Cuts Full-Year Profit Forecast On Eve Of Wii U Launch

With the launch of its flagship next-generation game console the Wii U less than a month away, Nintendo Co. Ltd. (PINK: NTDOY) cut its outlook for the 12 months ending in March 2013 by nearly half in light of a strong yen, falling hardware sales, and higher than expected production costs for its upcoming console in the first half of the fiscal year.

The iconic video game and console developer lowered its operating profit forecast for fiscal 2012, which ends March 31, 2013, to a net profit of ¥6 billion ($75.17 million) from an earlier ¥20 billion profit projection. It also reduced its full-year revenue outlook to ¥810 billion from its previous ¥820 billion estimate.

The company, which does not release quarterly earnings reports, reported a net loss of ¥27.99 billion in the six months to Sept. 30, compared with a net loss of ¥70.27 billion in the same period a year earlier. Revenue fell by 6.8 percent to ¥200.9 billion in the six-month period from April to September 2012.

The company cut its financial forecast for the first half of the current 2012 fiscal year, which ends March 31, 2013, much more dramatically than it cut its full-year forecast, saying that the first half of the fiscal year was hurt by struggling sales of its console line-up, including the Nintendo 3DS hand-held console and the home entertainment system Wii.

“Sales of the ‘Nintendo 3DS’ hardware and software were weaker in overseas markets than expected,” the Japanese company’s statement said. “In addition, the yen appreciation was beyond the expectation level and the exchange losses totaled 23.2 billion yen ($291 million).”

Earlier this month, the gaming giant dropped the price of the Wii to just $129 to extend its life span into the 2012 holiday season. It had also cut the price of the new hand-held 3DS last year after weak demand kept the device from catching on, even in Japan itself. Despite the effort to extend the shelf life of these devices, the company is still pinning its hopes on the Wii U’s performance in the second half of its fiscal year.

Nintendo said that it expects to sell 5.5 million Wii Us by March 31, the first time it has released a sales target for the device, according to the Financial Times. The company also continued to insist that it will stick to its previous forecast that it could sell 2.5 million DS handhelds over the entire fiscal year.

“The ‘Company’ continues to focus on selling ‘Nintendo 3DS’ during the second half of the fiscal year ending March 31, 2013, and aims to expand its business by launching the ‘Wii U’ system as the successor of ‘Wii’ in the year-end sales season in the main regions of the world,” the Nintendo statement added. The company lowered its full-year forecast for 3DS sales by 1 million, to 17.5 million.

The Wii U console is set to be released on Nov.18 in the United States, following shortly after in Europe and Japan. The original Wii console has sold over 100 million units since it was first released in 2006.

The Wii’s original success, however, was largely dependent on the company rebranding its console as a family-friendly device that could appeal to nongamers and children, a market that is increasingly transitioning to tablets and smartphones. Whereas heftier devices such as Microsoft’s (Nasdaq: MSFT) Xbox 360 and Sony’s (NYSE: SNE) Playstation 3 still appeal to a “core” gamer audience, both the market share of Nintendo’s living room console and its handheld risk being chipped away by “casual” games delivered through Facebook or general-purpose tablets and mobile devices.