Nintendo Switch’s early success has raised hopes of strong profits in the coming years as solid demand for new consoles is generally seen as a prelude to the strong sales of high-margin gaming software over several years.
- Last updated: October 30, 2017, 6:36 pm IST
- Edited by: Sarthak Dogra
Japanese video game maker Nintendo Co Ltd, which is already expecting the highest profit in seven years, almost doubled its full-year operating profit forecast on Monday as supply bottlenecks for its new switch game console gradually eased. Demand for the portable hybrid home switch has resulted in Nintendo’s stock price having almost doubled to a nine-year high since the device’s launch in March. Revenue exceeded the company’s original estimate, that of its predecessor Wii U, and suppliers were looking for parts. “We increased switch production to meet strong demand as it was difficult for customers to buy the consoles in retail stores,” said Tatsumi Kimishima, President of Nintendo, at a profit meeting, adding that the demand from the Company was misjudged.
The early success of the Switch raised hopes of a strong result in the coming years, as solid demand for new consoles is generally seen as a prelude to a strong sale of high-margin gaming software over several years. However, competition will intensify in the Christmas business season at the end of the year as Microsoft Corp launches its powerful, high-resolution Xbox One X console on November 7th. “The true performance of the Switch will be tested in the upcoming holiday season,” said Kimishima.
Nintendo expects a profit of 120 billion yen ($ 1.06 billion) for the year ending March, compared to 65 billion yen estimated three months ago. This was encouraged by switch sales and a weaker yen versus the euro. The new outlook is still below a Thomson Reuters Starmine SmartEstimate of 133.60 billion yen, drawn from forecasts by 22 analysts. Nintendo also increased its Switch sales forecast at the end of the year from 10 million to 14 million consoles. The new year’s goal alone would exceed the lifetime sales of 13.56 million consoles for the Wii U, which was on the market for about five years. The previous blockbuster Wii, which debuted in late 2006, sold around 20 million units in its first year and then sold over 100 million units.
Nintendo sold around 2.9 million switch consoles in the three months to September, for a total of 7.63 million units. Kimishima also said that Nintendo is preparing game software that will give Switch users new “experiences”. The software has the potential to attract new users and increase sales.
The results come at a time when Nintendo is trying to reduce dependency on consoles and stabilize fluctuating profits by opening up new areas such as smartphone games and theme parks with a list of popular characters. However, Kimishima affirmed that the main purpose of the branching is to increase non-player encounters to boost console sales. Nintendo also said operating profit for the three months ended September 23.75 billion yen, reversing a loss of 812 million yen from the previous year.
The share price ended Monday at 0.26 percent before earnings were released, compared to a 0.01 percent rise in the Nikkei benchmark index.
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