earnings


Back in April, Nintendo said it was counting on increased 3DS sales and profitability to help turn around the first full-year loss in the company's history. Today, Nintendo admitted that demand for its latest portable and the aging Wii continue to lag behind expectations, dragging down profits.

It's not like the 3DS is a Virtual Boy-level failure—the system did sell over 5 million units worldwide in the six months through September, including 2.1 million sales for the well-designed 3DS XL. First-party titles like New Super Mario Bros. 2, Super Mario 3D Land, and Mario Kart 7 continue to sell in the millions as well.

But Nintendo still lowered 3DS sales expectations for the full fiscal year, which ends in March, from 18.5 million to 17.5 million, reflecting increasingly tough competition from mobile and tablet games. The outdated Wii also continued its long sales decline, selling only 1.3 million units in the last six months due to what Nintendo admitted were "few new title releases." The company cut full-year sales expectations for the Wii drastically, from an expected 10.5 million in April to 5 million today.

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Back in April, Nintendo said it was counting on increased 3DS sales and profitability to help turn around the first full-year loss in the company's history. Today, Nintendo admitted that demand for its latest portable and the aging Wii continue to lag behind expectations, dragging down profits.

It's not like the 3DS is a Virtual Boy-level failure—the system did sell over 5 million units worldwide in the six months through September, including 2.1 million sales for the well-designed 3DS XL. First-party titles like New Super Mario Bros. 2, Super Mario 3D Land, and Mario Kart 7 continue to sell in the millions as well.

But Nintendo still lowered 3DS sales expectations for the full fiscal year, which ends in March, from 18.5 million to 17.5 million, reflecting increasingly tough competition from mobile and tablet games. The outdated Wii also continued its long sales decline, selling only 1.3 million units in the last six months due to what Nintendo admitted were "few new title releases." The company cut full-year sales expectations for the Wii drastically, from an expected 10.5 million in April to 5 million today.

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Nintendo's earnings report for the six-month period ending September 30 is a little jarring. First, the company boasts of multiple first-party games that sold in the millions, including over 4 million units of Pokemon Black and White versions in Japan, 5.1 million units of Super Mario Galaxy 2 worldwide, and over a million units of Wii Party. But these games weren't enough to keep the company in the black, with losses totaling ¥2 billion, or $24.7 million.

So what happened? A strong yen ate into earnings, sales of both the Nintendo Wii and the DS have softened, and Nintendo surprised everyone by giving the hotly anticipated 3DS system a first-quarter 2011 release, missing the holiday rush.

The company projects a drop of over 60 percent in profits year-over-year for the fiscal year ending in March 2011, which means two things: the 3DS needs to be a hit for Nintendo to bounce back from this slump, and the strong yen isn't doing the company any favors in the short or long term. Nintendo should be back in the black by the end of the fiscal year, but the party seems to be over: the company isn't going to be able to keep up the pace it enjoyed over the past few years.

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