News Article

Nintendo's Financial Results Bring Operational Losses But Overall Profit

Posted by Thomas Whitehead

Wii U sales to date pass three million

Nintendo has today published its quarterly financial results, which cover the nine months up to the end of December. In terms of the baseline figures that concern shareholders the outcome is disappointing if not a disaster, while sales of hardware seem to be in reasonable shape. Wii U is reported to have reached 3.06 million sales; the target of 5.5 million sales by the end of March has been revised down to 4 million units, but those figures are still arguably better than predicted by some in recent times.

The headline figure, in terms of overall performance, is an operating loss of 5.85 billion Yen – the loss was 16.4 billion Yen in the equivalent results last year — for the nine month period, which equates to a little over $64 million dollars. In comparison to last year there’s a 2.4% drop in net sales, though Ordinary and Net (overall) income both showed a profit, as opposed to significant losses last year. The figure that (arguably) truly matters is the operating income loss of 5.8 billion, as it represents the success of the core business of selling gaming hardware and software; compared to previous results it’s a reasonable outcome, even if no champagne corks are likely to be popped at Nintendo HQ.

In terms of hardware sales, as previously stated Wii U recorded sales of 3.06 million units, though Nintendo seems to have revised its target to 4 million sales up to the end of March – 11.6 million games have been sold, with an aim of reaching 16 million by the end of March. The 3DS has sold 12.71 million units in the nine month period, with over five million of those being in Japan. Nintendo is targeting to hit 15 million sales for the year by the end of March, with the lifetime sales of the hardware – on the market for 21 months at the point of these results – now hitting 29.84 million.

Wii and DS, as expected, are tailing off as they become distinctly “last-generation” for Nintendo. Over the nine month period Wii hardware sales still totalled 3.53 million units, while the DS family of systems moved 2.15 million units. The Wii is currently sitting on 99.38 million lifetime sales, so Nintendo will still hope to hit the landmark of 100 million units in the coming year.

Also of note is Nintendo’s adjustment of its projections for the end results of the financial year. After a first and second quarter of losses Nintendo had hoped to improve the overall year’s fortunes, estimating – on 24th October last year – that by the end of the year Nintendo would make an operating income profit of 20 billion Yen (over $200 million); it’s now estimating that area will see a loss for the whole year of the same amount. In the financial year ending March 31st 2012, Nintendo’s overall operating income loss was over 37 billion Yen (or roughly $409 million dollars), so while not a return to profitability these revised figures are, if nothing else, a step in the right direction.

We should add that Nintendo's Net Income is currently estimated at 14 billion Yen (just over $150 million), which results from exchange rates and other areas. This means that, actually, the business is projected to make a profit, even if its hardware and software activities will ultimately record a loss — a reflection of having clever accountants.

In scaling back projections for Wii U, in particular, Nintendo seems to have shifted from a policy of bold predictions to some that are, arguably, more realistic. While today’s update isn’t anything to shout about, it doesn’t quite play up to the “Nintendo is doomed” perspective, either. There are still some releases targeting various audiences on the way to Wii U this quarter, while the big titles announced for later in the year will be vital for the company’s hopes to return to profitability next year; 3DS momentum will also be a priority.

Let us know what you think of these results in the comments below.

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User Comments (32)

Shworange

#1

Shworange said:

Well yea, it sucks to take a loss, but what a significant turn around! Hopefully they can churn out some fantastic games to make the WiiU a big success by next Christmas.

Bankai

#2

Bankai said:

As far as I am concerned, Nintendo could not have hoped to have done better.

ThomasBW84Admin

#4

ThomasBW84 said:

I've actually updated the article to reflect a mistake on my part. Net income will mean that Nintendo as a company will probably make a profit, despite sales projections and an operating loss.

The wonder of accountants and financial instruments, and my inability to initially understand them...

Birthday_Boy

#6

Birthday_Boy said:

Nintendo needs to come up with something. A Price drop is way too early, and there doesn't seem to be must haves coming to Wii U yet, besides Rayman Legends, and thats debatable. I guess the only thing they can improve on at the moment is advertising.

The 3DS sales are actually higher than I would have thought. The 3DS really has support in Japan.

MAB

#7

MAB said:

Over 3 million in 3 months is nothing to laugh at really... Not bad for a system that was pronounced doomed before release ;)

luminalace

#8

luminalace said:

These article is confusing me. IGN reported that for the 9 months, Nintendo have profited 159m. Also on another site, they have claimed that Nintendo made 460m this quarter after losing 300m in the first two quarters which equates to the 160m profit that IGN mentioned. So what is the truth?

cornishlee

#9

cornishlee said:

@luminalace
As @ThomasBW84 said, the company has made a profit. It has also posted an operating loss on hardware and software sales. Accountants will always try to post an operating loss if they can - it means the company has less tax to pay.

Confused yet? That's why it's always so much better to have a chartered accountant do your tax returns (and I say that having just done mine without one for the first time in years, bleddy recession).

MarioKenny1992

#10

MarioKenny1992 said:

@Kyloctopus yeah, you make a good point, all they have to do is improve the advertising. they'll gradually announce more games by the time E3 hits, as well - they promised 3D Mario, Mario Kart, and Yarn Yoshi too. I also agree with the price drop being way too early - when they did the price drop for the 3DS, didn't they lose a **** load of money from that?

ThomasBW84Admin

#11

ThomasBW84 said:

Net income (the overall income) is at a profit ,14.5 billion Yen, which comes from various things like exchange rates. The operating income is at a loss, which is admittedly the angle I focused on (though I mentioned the net profit).

Basically, Nintendo made a loss on its core business of selling stuff, but exchange rates and accounting means that the company made a profit. Projections have been revised down for sales etc, so that's a negative.

DePapier

#12

DePapier said:

It might truly not be that good after all... I'm thinking that price drop theory might become a necessity, once those Wind Waker and X come out... I know we all want the Wii U in the same spot as the 3DS, and that might end up being what is needed: not beause the console is too expensive for what it is, but more because gamers don't really have that kind of money?

luminalace

#14

luminalace said:

Ok I understand but generally speaking, isn't this good news for Nintendo or more importantly a slap in the face for Nintendo haters who use articles like this to paint that Nintendo is doomed. If yes, Thomas please stop making it easier for such people by focusing on the negatives as it appears here.

ThomasBW84Admin

#16

ThomasBW84 said:

@luminalace I already said in the article that the results are reasonable and don't play up to the "Nintendo is doomed" line, but they're not any kind of success to go crazy about. Nintendo's sales and projected sales have gone down since the last statements in late October, including a change from an estimated 5.5 million Wii U sales to 4 million up to the end of March.

We'll have a feature later today breaking it down — with less jargon and more clarity, is the goal — but I'd say that Nintendo will be pleased that circumstances in markets will help them to overall profits, but will be disappointed that sales projections and profits from hardware and software will be at a loss for the year.

There are grey areas, but Nintendo is NOT doomed, we can safely say right now.

XCWarrior

#17

XCWarrior said:

So basically they had a solid, basically stale year. I can live with that. Will be interesting to see for all 3 companies how they battle off the tablets. I sure as heck wouldn't want to be an investor of Sony's gaming division. Vita alone is going to hurt that badly. Nintendo has some net profit, sot that's good. They aren't printing money right now, but they certainly aren't burning it for kicks.

DePapier

#18

DePapier said:

The thing is: Nintendo wants to be printing money. And I have tons of friends who aren't supportive of Nintendo, but not matter the amount of bashing they can do against Big N they STILL have a Wii. They STILL have Smash. They STILL have Xenoblade. As a Nintendo fan, I want those guys to have a taste of Wii U to understand that "Hell-no-how-have-I-lived-without-that-so-far" feeling. And once those games are gonna come out, all of them are gonna reach deep into their pockets to get the console: but since at that time the Wii U will be a totally legit system (games, loading improvements...), then Nintendo might as well give them a hand in reducing the price of the Basic bundle and rewarding those who take the step to the Deluxe set for balance.

I gave up on that opinion with the Wii U Direct, but it's at least something to consider if Nintendo wants to clearly dominate the market like they do with 3DS in terms of content and market share, and like they did with the Wii in terms of shear units sold.

nomeacuerdo

#19

nomeacuerdo said:

Surely the folks at nintendo aren't worried, the WiiU had a slow start, same happened with the 3DS. When Sony or Microsoft release their consoles, Nintendo will have plenty of clients, games and updates that will be an advantage over the competition.

aaronsullivan

#20

aaronsullivan said:

The price of the Wii U will probably stick until the prices of the new competing consoles are announced or even released. However, if the prices of those consoles are high enough, the Wii U price might start looking that much better and they won't have to drop it.

I was worried this was going to be worse. Wasn't I reading an estimated of 1.9 million consoles sold worldwide TO DATE just yesterday? This is 3.0 million consoles sold as of the end of December. Much closer to the 5 million by march hopeful projections. That was back when Pikmin wasn't delayed too, I think.

Anyway, the console is not only great as a concept, but Nintendo Land proves to me that the developers are at the top of their game and energized with new ideas and the ability to execute on them in a deeper way than the early Wii motion controls worked out.

Bring the big titles and ride the MiiVerse wave which is creating a bunch of new loyal fans in its own way! Good times are ahead, I think.

shingi_70

#21

shingi_70 said:

@nomeacuerdo

That's not how the industry works. Apple had record profit last week but their stick plummeted due to lack of growth. (Which is stupid)

This is good all things considering but the investors will probably complain about Nintendo slashing hardware expectations on the Wii U and 3DS despite software sales being great.

For the most part people (investors and Analysts) with no real background on how the market worked expected the Wii U to pull Wii numbers right out the gate.

Also screw you Wall Street Journal Pay Wall.

Bankai

#22

Bankai said:

@Sony_70 You pay for quality.

Seriously you seem to be a dude with an interest in the business side of things. Time to subscribe.

Peach64

#23

Peach64 said:

Neogaf is saying the 3 million is shipped, not sold through to customers. Nintendo still gets the money for them I guess.

Shipped 2012
US: 1.32
Japan: 0.83
Europe: 0.9

They'll be fine once they release the big games, but stuff like Lego City isn't going to shift hardware, and honestly I doubt monster hunter will much outside of Japan.

Sold 2012:
US: 0.89
Japan: 0.64
Europe: Unknown

ThomasBW84Admin

#24

ThomasBW84 said:

@Peach64 That's probably the case, the wording in the documents says sold, but businesses have a habit of saying that in relation to stock sold to suppliers.

Sean_Aaron

#25

Sean_Aaron said:

Considering the state of the economy that's not bad. If nothing improves I'm thinking we'll see a gradual (and long overdue) wind down of the rather ludicrous consumer economy enjoyed in the past couple of decades.

I think Nintendo can probably weather the storm because it can afford to downsize if need be. Microsoft and especially Sony are the ones that should be worried about a potentially even more expensive new entertainment system release later this year.

Banker-Style

#26

Banker-Style said:

3 Million for a console that only launch 2 months ago,yep that's sign that Nintendo are doomed.

MegaAdam

#28

MegaAdam said:

Hey! How come no one noticed that the DS has now surpassed the Playstation 2 as the best selling video game machine of all time?

JJtheTexan

#29

JJtheTexan said:

Look at it this way. If you have a Wii U now, it will be quite a collector's item in about 20 years if this system becomes Nintendo's Dreamcast.

Better yet, wait a few years for the price to be slashed as retailers clear out inventory, then buy one and keep it unboxed so you can sell it at a tidy profit in 2035.

Seriously though, I really hope Nintendo figures this out soon.

fortius54

#30

fortius54 said:

The deal is if Nintendo is doomed the same can be said for the other guys. This will be a crucial year for gaming in general. We have these android based systems on the way like Gamestick and Ouya, and we have Sony and Microsoft introducing their respective systems. I think by years end we will have an idea of what the future of gaming will look like.

Personally, I think Nintendo falls somewherein the middle of the two platforms. Their performance will depend on a couple of factors. First, the first party games will be a big deal. Naturally, most of those will do well. Unfortunately, it will likely come at the expense of the third party developers. $60 is a lot of money to pay for a game.

Secondly, I think Nintendo may need to embrace a new strategy for their eShop go to market that is similar to Apple and Android. Full retail releases online is great and ambitious, but if you couple that with these games that have smaller transaction costs, there could be a bit of a boom for them. I know there are a few games like this on eShop, but there could be so many more.

It will certainly be an interesting year, but one thing is for sure, gaming is here to stay. In what form will be the ultimate question.

Emaan

#31

Emaan said:

The Wii U sold a lot better than I thought it did in this short amount of time. There's still hope for Nintendo getting back on top of things.

luminalace

#32

luminalace said:

Well to be honest I am not surprised they won't reach their sales expectation for Wii U because of the lack of any big Nintendo games.

still it's disappointing nonetheless and hope Nintendo will do better in the coming months.

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