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Last updated: July 29, 2011 12:26 am
Nintendo is slashing the price of its 3DS handheld game console by up to 40 per cent just four months after its launch, with poor sales leading to a Y25bn ($321m) quarterly loss.
The Japanese group has dominated the game hardware market in recent years with its small DS machines and larger Wii home systems. But it is facing difficult challenges as consumers increasingly choose to play games on general-purpose devices such as smartphones and tablet computers.
Nintendo said it would lower the cost of the portable console, which features a 3D screen, around the world. In Japan the price of the device will be slashed to Y15,000 from Y25,000 in an effort to generate sales “momentum”. In the US, the largest gaming market, the price reduction will be slightly narrower, falling from $249 to $170. And in Europe the price will fall by about a third from £229.99 ($376). It will be up to retailers to decide how much of that price cut they pass on to consumers.
Nintendo said its revenues plunged 50 per cent in the first quarter compared with a year earlier. Some of the decline was likely to have been caused by the after-effects of Japan’s March 11 earthquake and tsunami.
The group suffered a net loss of Y25.5bn in the three months to June and a pre-tax operating loss of Y37.7bn – its first quarterly deficits since it began reporting earnings in three-month increments in 2004. Industry analysts had expected Nintendo to earn a small profit.
The company also slashed its full-year net profit forecast by 82 per cent to Y20bn. It has never lost money on a full-year basis.
Nintendo said it expected the 3DS price cut to enable it to meet its goal of selling 16m of the devices this year, though the volume would inevitably come at the expense of profit margins. It is hoping the device’s appeal will rise as more games developers introduce specialised 3D titles, a lack of which has been seen as a handicap.
Analysts at Wedbush Securities said Nintendo faced declining sales at least until it introduced a new version of the Wii home console next year.
“It is clear that the Wii audience is slowly shifting to either HD consoles or to social games, while it is equally clear that mobile game sales are cannibalising handheld [console] game sales,” they said in a note.
The Japanese earthquake and worsening economic conditions in the US and Europe have hurt demand for consumer electronics across the board.
On Thursday Sony cut its full-year profit outlook by a quarter after it scaled back estimates for annual television sales, while Panasonic blamed its fall into the red with a net loss of Y30bn on the Japanese disaster.
Additional reporting by Maija Palmer
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