Nintendo Missing Profit Target?

[Bond]

MISSING PROFIT TARGET?

Analysts said the poor performance of its GameCube operations, especially in high-margin software sales, and the yen's rise against the dollar were expected to weigh on the game exporter's profit for this business year.

Hit by the strong yen and slack demand for its game systems, Nintendo in October slashed its net profit forecast for 2002/03 by 11 percent to 80 billion yen ($676.2 million), based on an exchange rate of 123 yen per dollar versus the current 118 yen.

For Nintendo, which holds hefty foreign-currency-based assets, each one-yen drop in the dollar trims 3.5 billion yen from non-operating profit, in addition to the negative impact on operating profits in yen terms, analysts said.

Iwata agreed that the yen's current level was a negative factor but said it was too early to revise profit forecasts as the Game Boy Advance's performance was solid and new Pokemon games due in North America in March should give it a boost.

As worries mount over the GameCube's outlook, Nintendo shares fell this week to 10,090 yen, the lowest in nearly four years.

They have fallen 50 percent over the past year, underperforming a 15 percent decline in the benchmark Nikkei average and in the industry index

Iwata said that he was not satisfied with the stock price.

"Given the slumping Tokyo stock market as a whole, it's not only Nintendo's problem. But it's my duty to bring good results to investors," Iwata said.

Nintendo, which bought back 4.65 million of its own stock during the October-December period, would buy back shares when the stock fell excessively, but it needed to raise profits in its core business to shore up the price over the long term, he said.

Investors want to see new ideas before pushing the stock up.

"Nintendo's GameCube is way behind Sony's PlayStation and looks to lose out to the (Microsoft) Xbox as well, and with no new products in the pipeline, it's hard to see where the growth will come from," said Takehiko Takachio, senior portfolio manager at Kokusai Asset Management.

"But Nintendo is still a company with great development capabilities, and I don't think the GameCube is going so bad that they will have to follow the road that Sega took in withdrawing from hardware," he said.

Iwata dismissed speculation that the company would eventually abandon home console production.

"When we withdraw from the home game console, that's when we withdraw from the video game business," he said.

Press Release

Nintendo announced this after announcing GC's successor.