Nintendo Co Ltd said it would launch a successor to its aging Wii game console in 2012 as it struggles to win back users from rivals Microsoft and Sony and seeks to reverse a slump in profits.
Nintendo said Monday that it expects profits to remain almost flat in the current financial year, despite the launch of its much-touted 3D-capable handheld games device, whose sales in Japan have been overshadowed by the devastating March 11 earthquake.
The maker of the DS handheld game player, which is also facing competition from smartphone and tablet makers including Apple Inc, said Monday it will demonstrate the Wii's replacement in Los Angeles on June 7 at the E3 game show.
Nintendo is looking to repeat past successes in the gaming market. The Wii took the industry by storm five years ago by offering motion-based gaming that appealed to a broad audience rather than just core video game fans.
This time around, however, Nintendo will find it harder to sidestep its competitors and must also contend with a burgeoning smartphone market that didn't exist in 2006, said Mitsushige Akino, Chief Fund Manager at Ichiyoshi Investment Management.
Core users and game lovers will certainly buy it, but I think it will be hard to capture buyers outside of that group, he said.
Monday, the company revealed quarterly profit of just 12 billion yen, down from 59.9 billion yen a year earlier, as it slashed prices and the strong yen hurt the value of its sales abroad. Having sold 86 million units of the Wii since its launch in 2006, sales last business year slipped by a quarter to 15 million.
We believe that the share price will come under pressure as the market digests the weak Q4 results and company projection for the year to March 2012, analyst Jay Defibaugh of MF Global said in a research note.
Nintendo sees first half profit for the current financial year down more than 63 percent on the previous year, with a bounce back in the second half.
Nintendo declined to provide further details on the Wii successor.
We have decided that it is best to let people experience it for themselves at E3, Nintendo CEO Satoru Iwata, told a news conference.
It will offer a new way of playing games within the home, said Iwata, a former game designer.
In another transition to new-generation hardware, Nintendo this year launched a glasses-free 3D-capable handheld games device, the 3DS, to fend off growing competition from other games companies, as well as makers of smartphones and tablets.
It must also contend with Microsoft and Sony which have brought new products to the market since the Wii's debut.
In March, Microsoft said it had sold more than 10 million Kinect motion-sensing game system units worldwide in just over four months, making it the fastest-selling consumer device on record. The infrared camera add-on for the Xbox game console tracks body gestures for video games. Sony's rival motion sensing device is dubbed Move.
In the business year just ended, Wii console sales fell to 15.1 million units from 20.1 million a year earlier. It expects sales to fall by a further 2 million units this business year.
Sales of its non-3D handheld DS shrank by almost 10 million units to 17.5 million, and the company expects that to slide to 11 million this year.
Nintendo's operating profit fell 52 percent to 171.1 billion yen ($2.09 billion) in the year ended in March from 356.8 billion yen the previous year, below a Thomson Reuters SmartEstimate of 200.8 billion yen.
SmartEstimates put more weight on recent forecasts by highly rated analysts.
Nintendo expects operating profit of 175 billion yen for the year to March 2012, compared with a consensus of 215.8 billion yen, based on eight analysts polled by Thomson Reuters I/B/E/S after the March 11 disaster.
Nintendo shares closed up 0.9 percent ahead of the earnings report in a flat broader market.
($1 = 81.845 Japanese Yen)
(Writing by Anshuman Daga and Tim Kelly; Editing by Lincoln Feast and Nathan Layne)