Thursday, July 28, 2011

Nintendo affected by 3DS price-cut

Nintendo Co. fell the most in at least 21 years in Osaka trading after a lack of demand for its new 3-D handheld player led the company to slash the product's price and earnings forecasts.

Nintendo, the world's largest maker of video-game machines, tumbled as much as 21 percent to 11,010 yen and traded at 11,210 yen as of the 11 a.m. trading break on the Osaka Securities Exchange. That's the stock's biggest drop according to exchange data compiled by Bloomberg dating to May 18, 1990, and its lowest price since before the Wii console was introduced in November 2006.

Nintendo will cut the price of the five-month-old 3DS player as much as 40 percent, and it lowered the profit forecast 82 percent as more gamers flock to Apple Inc.'s iPhone and online games played on Facebook Inc.'s service. The company needed "drastic measures" to lure gamers, President Satoru Iwata told reporters in Osaka yesterday.

"The company remains in the severe situation for next few years until it develops something revolutionary, not an extension of existing products," said Mitsuo Shimizu, an analyst at Cosmo Securities Co. in Tokyo. "Social games are killer because who would spend around $40 to buy software when you can get it for free or something much lower."

JPMorgan Chase & Co. and Nomura Holdings Inc. were among brokers that cut their ratings on the stock after the earnings missed analysts' estimates. The price is now at its lowest since May 2004.

3DS Price Cut

Net income may total 20 billion yen ($257 million) for the year ending March 31, compared with Nintendo's previous estimate of 110 billion yen, the Kyoto-based company said yesterday. The forecast was almost 70 percent below the lowest of the 21 analyst estimates compiled by Bloomberg.

The price of the 3DS, released in February, will be lowered to 15,000 yen from 25,000 yen in Japan starting Aug. 11 to trigger "momentum" for the product before the year-end shopping season, the company said. In the U.S., the 3DS will cost $169.99 starting Aug. 12, down 32 percent from the current price of $249.99.

"Not a long time has passed since they started to sell 3DS, so it's a little doubtful if they made much profit out of it," said Masayuki Ohtani, a strategist at Securities Japan Inc. in Tokyo.

Cheaper Than Vita

The cuts will make the 3DS cheaper than the PlayStation Vita portable player that Sony Corp. plans to introduce this year.

Nintendo's 20 billion yen forecast would result in its lowest profit in more than 25 years. The company also slashed its revenue forecast 18 percent to 900 billion yen and reduced the full-year operating profit estimate by 80 percent to 35 billion yen.

The video-game maker kept a forecast to sell 16 million 3DS players by March 31, betting the price cut will spur demand. Nintendo cut its annual sales projections for the Wii by 7.7 percent to 12 million and lowered the forecast for previous- generation DS players by 18 percent to 9 million units.

The company plans to introduce flagship titles such as "Super Mario 3DLand" and "Mario Kart" in November and December for the 3DS, the company said.

Capcom Co., based in Osaka, Japan, began selling a game from the "Resident Evil" franchise for the 3DS this fiscal year.

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