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July 25, 2007 10:41 pm

Nintendo raises profit forecast on Wii strength

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Nintendo on Wednesday underlined its dominance over Sony in the games market as it ramped up its full-year profit forecast on strong sales of Wii and DS games consoles.

The Wii is outselling Sony’s PlayStation 3 by six to one in Japan and more than two to one in the US. Nintendo’s success has catapulted the company into the ranks of Japan’s top 10 businesses by market capitalisation, in spite of its relatively small size.

Nintendo overtook Sony in market cap this month when it climbed to a value of more than Y6,500bn ($54bn). But it has only 3,313 full-time employees globally, compared with Sony’s 163,000.

On Wednesday, Nintendo revised upwards its operating profit forecast by 37 per cent to Y370bn for the year to March 2008, considerably higher than analyst expectations of about Y300bn.

The company also raised its annual dividend forecast from Y700 to Y960.

The move came as Nintendo reported a more than threefold increase in quarterly profits. Operating profit leapt to Y90.63bn in the three months to June, from Y28.8bn a year earlier.

Nintendo’s user-friendly Wii and DS games players have sold heavily by winning the loyalty of children, women and older people, not just the traditional core market of young men.

Analysts have also praised Nintendo’s decision to work closely with third-party software developers.

This reversal of a previous strategy of relying heavily on in-house developers has borne fruit in a more diverse title line-up. Nintendo on Wednesday raised its sales forecasts for the Wii by 18 per cent to 16.5m units in the year to March and for the DS by 18 per cent to 26m.

Nintendo’s shares rose 3.5 per cent to Y56,800 on Wednesday.

● Separately, Matsushita Electric Industrial, the world’s biggest consumer electronics maker, under the Panasonic brand, also announced strong quarterly results on Wednesday.

Operating profit rose 13.5 per cent to Y73.89bn in the three months to June, boosted by strong sales of digital cameras and liquid crystal display televisions. Matsushita managed to increase profit despite Tuesday’s news of a higher loss at ailing electronics manufacturing subsidiary JVC.

But Matsushita will soon be able to remove JVC from its consolidated accounts, following Tuesday’s announcement that its shareholding will be diluted to a minority stake after a capital tie-up with audio equipment maker Kenwood and hedge fund Sparx. Strong LCD TV sales also boosted quarterly operating profit by 4.5 per cent to Y42.26bn for Sharp.

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