Nintendo Reports Profits
November 22, 2000

Japan's Nintendo Co Ltd, the world's second-largest maker of home video-game machines, reported on Wednesday better half-year profits mainly due to an increase in the value of its $4.3 billion dollar-based assets.

However, the inventor of the smash-hit Pokemon game character, said that while its Game Boy handheld player was doing well, sales of its flagship Nintendo64 game console -- intended to challenge rival Sony's runaway Playstation -- had disappointed.

But Nintendo said it was optimistic for next year because customers appeared to be awaiting its next generation consoles.

It said the dollar's relative strength against the yen on September 30, when interim assets are appraised, compared with six months ago boosted parent pre-tax profit in April-September by 157 percent to 51.79 billion yen ($470.6 million).

In the same period a year ago, hefty appraisal losses on the firm's dollar-based assets had offset robust sales of its hit Pokemon or Pocket Monsters, a craze among children worldwide.

Profits were slightly above analysts' estimates of 44 billion to 50 billion yen, and against 20 billion yen a year earlier.

That was despite a 26 percent drop in sales to 140 billion yen caused by the yen's appreciation against the dollar on average compared with the year-earlier period.

A stronger yen decreases the value of overseas sales, which account for 79 percent of Nintendo's total revenue, and often forces exporters to lower prices to remain competitive.

Sales of its Game Boy hand-held game device and compatible software were strong overseas, but those of its 64-bit home video game console Nintendo64 have been slack, hurt by Sony Corp's PlayStation 2, launched in March at home and in October in the United States.

"We believe demand for Nintendo64 consoles and software has weakened because game users are waiting for our new player to be released next year," Managing Director Yoshihiro Mori told a news conference.

"Sales and profit are expected to rise in the next business year, helped by our new game players," he said.

Nintendo plans to launch Game Boy Advance, the successor to the world's most popular handheld game player Game Boy next March, and a new home video game machine "Game Cube" in July.

SLACK SALES OF NINTENDO64

For the six months, Nintendo sold 10.16 million Game Boy consoles worldwide, including 8.77 million overseas.

Analysts said the sales could have been higher but for no supply problems due to parts shortages.

Nintendo projected sales of 23 million Game Boy players for the full year, including one million of Game Boy Advance. It expected sales of 3.05 million Nintendo64 consoles, down from its May projection of 3.5 million.

"Cutting full-year sales estimates was not expected. But it may mean saving production capacity before the launch of the new game machines," said Morgan Stanley analyst Mitsuko Morita.

"We retain our outperform rating on Nintendo as the new game players are expected to boost business."

For the full year to March 31, it projected a 78 billion yen group net profit on sales of 500 billion yen, down from its May forecast of 82 billion yen profit and sales of 540 billion yen, citing the weak Nintendo64 sales and an appraisal loss on shares.

Shares in Nintendo closed up 1.25 percent at 18,650 yen, prior to the announcement. They have risen about 10 percent this year, but are down 29 percent down from the year's peak of 26,400 yen.

Nintendo's profit recovery contrasted with the dim results of rival game makers.

Last month, Sony reported a group net loss of 68.47 billion yen in the six months, against a 64.94 billion yen net profit a year earlier due to the heavy costs of launching PlayStation 2.

A day later, Sega Corp issued a warning, forecasting a group net loss of 29 billion yen against its initial estimate of a 600 million yen profit.

It blamed a cut in the overseas sales price of its mainstay Dreamcast game consoles to fend off competition from PlayStation 2.

Source: Reuters