Nintendo slashes Wii U sales forecasts

Nintendo has slashed its sales forecasts for the new Wii U game console, acknowledging that its flagship device and its handheld cousins are losing popularity as gamers shift to smartphones and tablet computers.

The Japanese group on Wednesday cut its projection for Wii U shipments by 27 per cent from 5.5m to 4m for the financial year ending in March. It also reduced its sales estimates for portable 3DS and DS players – from 17.m to 15m and 2.5m to 2.3m, respectively.

Nintendo had been pinning its hopes for revival on the Wii U, an overhaul of its once best-selling Wii player which was launched in November. Last year it posted its first annual loss in its five decades as a public company, owing to declining sales and the revenue-sapping effects of a strong yen.

The currency’s recent reversal prompted Nintendo to raise its net profit forecast on Wednesday in spite of the poor sales numbers. It now expects a full-year net profit of Y14bn ($153m) instead of its previous forecast of Y6bn – a sharp improvement but still short of the Y20bn it had been predicting before October last year.

“The weaker yen is positive for Nintendo,” Makoto Kikuchi, chief executive of Myojo Asset Management Japan, told Bloomberg. But he added “no matter how it does, it’s in an industry that’s shrinking”.

Nintendo expects an operating loss of Y20bn, compared with its previous forecast of a Y20bn profit, underscoring the weakness of its core games business.

Cheap, downloadable games for the iPhone, iPad and similar machines have emerged as a significant competitive threat to hardware makers.

US sales of video-game software, hardware and accessories shrank 22 per cent in December from a year earlier to $3.21bn, according to NPD, an industry research group. Console sales were down 20 per cent at $1.07bn.

Nintendo has been particularly hard hit by the shift to tablet and mobile phone games, since it has targeted so-called casual gamers, including younger users and women – the very groups most quickly abandoning specialised consoles.

However, the company indicated that it had no plans to reverse its strategy, saying it “continues to pursue its basic strategy of ‘gaming population expansion’ by offering compelling products that anyone can enjoy, regardless of age, gender or gaming experience”.

Revenues for the year through March are forecast to be 17 per cent below its earlier forecast, at Y670bn, due to weaker than expected sales at the crucial year end and early this year. Nintendo made a net loss of Y43bn in the year to last March.