Nintendo forecasts net loss, slashes Wii U sales target

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Nintendo on Friday warned it would swing back into the red this fiscal year as the Japanese gaming giant slashed its sales target for the Wii U console, blaming poor sales over the key holiday season.

The dramatic downgrade stands in marked contrast to rivals Sony and Microsoft which have seen huge demand for their new consoles as the firms battle for control of a sector worth about $44 billion annually.

Nintendo said Friday it expects a loss of 25 billion yen in the year to March, reversing an earlier 55 billion yen net profit forecast, while annual revenue would drop 36%.

The company, maker of the Donkey Kong and Super Mario brands, also said it expected to sell just 2.8 million units worldwide of the Wii U, less than a third of it earlier prediction for 9.0 million consoles.

Nintendo’s hopes for big holiday season demand to boost flagging sales were dashed, forcing it to chop forecasts as demand for the Wii’s high-margin software slumped, it said.

“During the year-end shopping season, we weren’t able to lift sales momentum for the Wii U,” Nintendo President Satoru Iwata told a press briefing in Osaka.

“The decrease in game software sales is having the biggest impact” on profit, he added.

Demand was weak in the crucial European and U.S. markets, Iwata said as he apologised to shareholders.

“My duty, more than anything else, is to revive our business momentum,” he said.

Nintendo’s Tokyo-listed shares ended down 2.75% at 14,645 yen on Friday, before the firm made its announcement.

The firm’s revised figures came as key domestic rival Sony saw record demand for its new PlayStation 4 console, which had already sold more than 4.2 million units by the start of the year.

The console was launched on Nov 15.

US rival Microsoft has also seen robust demand for its Xbox One console, which sold more than one million units in the 24 hours after its November release.

For Nintendo, the grim forecast is especially disappointing after it scratched back to profitability last year thanks to a sharply weaker yen, which inflates Japanese firms’ repatriated profits.

The company has previously blamed weak earnings partly on high development and marketing costs for the Wii U, although sales of its 3DS handheld console and related game titles fared better.

Nintendo, which cut prices for both products to shore up flagging sales, launched the Wii U in late 2012 with high hopes it would repeat the original Wii’s blockbuster success.

But analysts said a lack of games took away some of the fizz the company had been hoping for after the 3DS — the world’s first video game console with a 3D screen that works without special glasses — had initially suffered from disappointing demand abroad.

Sony, Nintendo and Microsoft are giants in the global video games industry, but have faced tough economic conditions in the U.S. and Europe, while also fending off a challenge from cheap — or sometimes free — downloadable games for smartphones and tablets.