Topic: Nintendo to Post Major Financial Loss

[NWR_DrewMG]

The rumor mill predicts a loss of over a billion dollars over the second half of 2011.

http://www.nintendoworldreport.com/rumor/28231

Nintendo will post a loss of Â¥100 billion tomorrow (approximately $1.31 billion), according to Japanese newspaper Nikkei. The loss is for the period of April 2011 through September 2011. According to the report, the loss is mostly attributed to the value of the yen against the Euro, and amounts for Â¥40 billion of the rumored loss. In comparison, for the same period in 2010, Nintendo posted a loss of just over Â¥4 billion.

The predicted loss for the period was Â¥55 billion, making the rumored final figures almost double what was predicted. Andriasang notes that it is unclear how much of the report was Nikkei's analysts doing the math themselves.

Nintendo will reveal its earnings for the period in Japan on October 27.

[Kytim89]

Nintendo is going to have to pull a rabbit out its ass to turn this around.

[xcwarrior]

Well to a point they deserve this for not releasing basically anything on Wii for 6 months and doing the same thing with 3DS. They will turn it around of course, but I almost think they forecast for these kind of drops.

[UncleBob]

Nintendo is still making a profit for the year - in spite of this loss, which 40% is virtually completely beyond Nintendo's control (unless they start jacking up prices in the US and Europe to make up for the super-strong Yen).

They're also the #2 game company in Japan and the #1 hardware manufacture.

I seriously doubt Nintendo is too worried about turning anything around.

Nintendo shareholders... however....

[Kytim89]

This makes me wonder if Nintendo might actually give in and release Operation Rainfall titles?

[Discostew]

If it is mostly because of the yen vs the Euro, then it isn't just Nintendo affected by this. Besides, I'm sure things will change this holiday season.

[broodwars]

I'm suddenly reminded of that scene in "What About Bob?" where the house explodes and its two formers owners are on the boat on the lake shouting "BURN!  BURN!" and laughing.   :

With the way that the Wii's been left out in the cold this year in NA in favor of the 3DS, I can't say I'm not enjoying this and hope that Nintendo sees several more quarters like it (if only to see them completely humbled for the first time since the Wii launched).  Still, the 3DS price drop, Zelda, and Christmas will probably allow them to salvage this current quarter.  I'd look for them to post modest profits unless the 3DS just completely dominates over the Christmas season.

[Kytim89]

I'm suddenly reminded of that scene in "What About Bob?" where the house explodes and its two formers owners are on the boat on the lake shouting "BURN!  BURN!" and laughing.   : :

With the way that the Wii's been left out in the cold this year in NA in favor of the 3DS, I can't say I'm not enjoying this and hope that Nintendo sees several more quarters like it (if only to see them completely humbled for the first time since the Wii launched).  Still, the 3DS price drop, Zelda, and Christmas will probably allow them to salvage this current quarter.  I'd look for them to post modest profits unless the 3DS just completely dominates over the Christmas season.

I do not see anything but Mario Kart 7 having a chance of pushing 3DS units this season. Does IOS gaming have anything to do with this? I mean Level 5 just announced that the Layton games are being ported to the Iphone.

[MegaByte]

So in previous results, it was the Yen vs. the Dollar that caused their losses. Did they recently convert a bunch of holdings into Euros?

[broodwars]

I do not see anything but Mario 3D Kart having a chance of pushing 3DS units this season. Does IOS gaming have anything to do with this? I mean Level 5 just announced that the Layton games are being ported to the Iphone.

Mario Kart 7 will probably do well, but the big wild card is Super Mario 3D Land.  The general public has definitely preferred the 2D Marios to the 3D ones, so it'll be interesting to see how that game is received.  It'll probably do well as well, though, since if you're a 3DS owner I don't see how you don't buy that game.

[Kytim89]

Another reason why Nintendo is reporting losses is because the two big juggernauts, the Wii and DS, are slowing down in terms of games, but their popularity is not dissipating as quickly. Until the Wii and 3DS finally do fully collapse then the 3DS, and even the Wii U, will suffer slow sales.
 
You have to keep in mind that the economy here the states is going to hell. I do not have nearly the amount of money I did back in 2008 when I bought my Wii. Hell, up until 2010 I was purchasing every DS model except the XL. I may not be able to afford the 3DS for quite some time.

[BlackNMild2k1]

So in previous results, it was the Yen vs. the Dollar that caused their losses. Did they recently convert a bunch of holdings into Euros?

I had read that they had a bunch of holding in US Dollars a while back.
That could be the reason for the major losses as the dollar is almost toilet paper at this point.

[Kytim89]

If Nintendo wants the 3DS and Wii U to be successful then they must not only encourage their own developers and third parties to push their system and IPs to heights never before seen on a Nintendo console. This means that there must be a fresh perspective on new and old franchises in the future.

[UncleBob]

This makes me wonder if Nintendo might actually give in and release Operation Rainfall titles?

Where's that eye-rolling smiley?

[MegaByte]

I had read that they had a bunch of holding in US Dollars a while back.
That could be the reason for the major losses as the dollar is almost toilet paper at this point.

Right. What's confusing me is that this report specifically says Euro. I'm trying to figure out why that's relevant now.

[UncleBob]

Nintendo's got lots of money everywhere.

Also, think of it this way.  Numbers are made up to make things a little easier...

Nintendo sells a system in Japan for 25,000 Yen.  When they launch the system, there's a (fake) exchange rate of 125 Yen: 1 Euro - so this translates to about 200 Euros... so they put a price tag of 200-250 Euros on it.

Four years later, the exchange rate is now 75 Yen: 1 Euro - putting that 25,000 Yen system at 333 Euro... but, of course, Nintendo can't just start raising the price of the system in Europe... they have to lower it - it's older, after all.

So, all of the stock they have built up in Europe, all the holdings, everything they have in Europe is now worth (made up numbers again) 37% less... and Nintendo can't just jack up prices to make up for it.

Of course, in this case, we're dealing with a 4-year old system - how much has the Euro dropped since the 3DS launched?  *and* Nintendo just did a massive price drop on the 3DS.  Not only did they lose money (assets, really) there (a warehouse full of 1,000 $250 3DS units - $250,000 just became worth $169,000), you also have to factor in the costs related to the dropping currency exchange... (again, made up numbers) - 1,000 3DS systems that are in a NA warehouse at launch are worth $250,000 - or, let's say an exchange rate of 100 Yen:$1, the warehouse is worth 25,000,000 Yen.  Now, we drop the price and the Yen gets stronger, say 75 Yen: $1, that warehouse is now worth $169,000 - or 12,675,000 Yen.  Bamn - doing nothing but sitting on stock, you just posted a 50% loss.  Obviously, the price drop was Nintendo's "fault" - but the changes of the Yen vs. other currency isn't really something they can do much about.

[MegaByte]

Nintendo's got lots of money everywhere.

That's my point. The euro hasn't tanked especially compared to the dollar, so I don't understand why they specifically said that unless it's just because of the general Eurozone financial crisis that's been a focus of the press lately.

[BlackNMild2k1]

Maybe Nintendo was holding all European holdings in Greece...

[Shaymin]

This makes me wonder if Nintendo might actually give in and release Operation Rainfall titles?

The exchange rate is probably the main reason we haven't gotten them yet, quite frankly. I don't see that changing.

But yeah, a lot of that is beyond NCL's control - the US dollar's in the tank and they'll need to fellate the Stonecutters to get anything done about the British pound.

[Ceric]

I think were going to find today that:

1) Nintendo has had weak sells this quarter in the NoA Territory
2) NoE Territory on the other hand had the Strongest sales for this period but due to more unfavorable Exchange Nintendo made a fraction of what it would have just last year
3) A large part of the drop is also the 3DS Price Cut not being factored into original projection (Which was a loss if I read the story correctly.)
4)  Nintendo is confident that this holiday season will insure they are profitable for the Fiscal Year despite these losses (Skyward Sword alone will probably do most the work)

[UncleBob]

Toyota has been in the news a bit regarding the strong Yen and how it's hurting them...
http://online.wsj.com/article/SB10001424052970203388804576612701734475580.html

[oohhboy]

It's even worse than that. Word has it Nintendo is going to post it's first ever Annual loss in the company's history.

Clicky.

My guess without doing alot more research in corporate accounting it that Japanese companies are required to bring in their earning back into the country unlike America where money is intentionally kept offshore in order to avoid tax by holding sums in tax shelters and inter-company loans via subsidiaries and shell companies. It makes currency changes real to Nintendo since they lack the ability to buffer it by holding money offshore which would lead to the previously mentioned shenaigans.

[ejamer]

Hmm... 3DS flopped out of the gate and still doesn't have any "must own" retail software, prompting massive price cuts to try and spur sales. Wii has been a complete non-factor in 2011 with Nintendo putting all their eggs in the Zelda holiday basket. On top of that, factors that Nintendo don't control (global financial situation, currency exchange rates) did nothing to help.


So why is this news a surprise? What did Nintendo possibly do to deserve a profit this year? Investors will say that the sky is falling but that's nothing new either.


In the big scheme of things, this news probably doesn't matter. The company can survive a loss, and will probably bounce back - Nintendo's performance can't be much worse next year than it was in 2011.

[Ceric]

Agree.  This isn't a real surprise thinking about it.  Some people argue Nintendo should use its War Chest.  Welp, here is Nintendo using its War Chest.

[oohhboy]

It's not a big surprise, but for Nintendo it's a loss of prestige and by extension, Iwata also shares. When a company can run for 132 years without an annual loss, when it does happen, that history makes it a big deal. Iwata should be sweating bullets at this point. We all know what happened to Gunpie Yokoi and his mistake was far less than this.