Nintendo Loses Half a Billion Bucks

Nintendo has made a whopping loss of, depending on the precise measure used, around half a billion dollars. It’s the company’s worst performance since before the NES first launched.

There are two different figures in media reports, both technically accurate. The company’s operating income, which is effectively its profit or loss from doing business, was minus 37.3 billion yen (US$460 million.) Its net income, which takes into effect interest payments, taxes and miscellaneous transactions not connected to the core business (such as buying or selling property) was minus 43.2 billion yen (US$533 million.)

The loss, the worst for three decades, was actually lower than the company had expected. It was a drop in revenue rather than cost increases that caused the problem, with major factors including:

• A strong yen on the currency market making prices outside of Japan comparatively more expensive.
• A major price cut to the 3DS (which looks to have taken it below cost price) to compete with other devices.
• An overall drop in sales of the DS range from 21.1 million to 18.6 million.
• A major drop in Wii sales from 15.1 million to 9.8 million.

The biggest problem seems to be that the type of customers Nintendo was able to win over with the DS and Wii are the very people who are now more likely to splash a few bucks on smartphones and tablets rather than pay higher prices for console games, let alone buy new hardware.

Analysts are suggesting Nintendo may have to make the decision to allow its own software onto other systems — a decision current management don’t appear keen on.

[Via BBC News | 3DS Picture Source: Minhimalism – Flickr (CC)]