Nintendo posts deep loss, shares plunge
Nintendo posted its latest quarter's dire results, causing traders to dump the stock. The sell-off sent the stock down more than 20 percent.
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It took almost three years for the company to lower the price on the Wii for the first time, and that was by $50.Skip to next paragraph
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"This shows that Nintendo feels it really needs to lift up the 3DS," Maeda said.
The Kyoto-based company also faces increased competition from smartphones and games on social networks, particularly among the casual gamers it targeted with the Wii. At a recent general shareholders meeting, President Satoru Iwata told investors Nintendo would not compete directly with smartphones by adding extra functions to the 3DS.
A strong yen hasn't made things any easier. About 80 percent of Nintendo's sales are from outside of Japan, making it vulnerable to currency fluctuations.
Sales during the quarter slumped more than 50 percent to 93.93 billion yen, leading to an operating loss of 37.71 billion yen.
Investors had already punished Nintendo's stock price this year, reflecting their anxiety about the company's health. But with Friday's tumble, Nintendo's stock price has fallen more than 50 percent this year compared with a relatively flat performance by the benchmark Nikkei 225 stock average.
Macquarie Capital Securities downgraded its rating on the issue one notch to "Neutral" earlier this month. The 3DS has not lived up to expectations, and Nintendo's next major launch — the Wii U — won't arrive until mid-2012, analyst David Gibson said in his report.
"We believe the company's focus on doing both hardware/software, while noble, will ultimately limit their ability to be relevant in a 'smartphone in every pocket' world," he said.
Gibson suggests Nintendo needs to take "radical" steps, such as buying U.S. video game publisher TakeTwo Interactive Software and making its hit game "Grand Theft Auto" exclusive to the Wii U, which would attract core gamers to the platform.
For now, Nintendo is banking on the cheaper 3DS and new games to lure shoppers during the critical year-end shopping season. "Super Mario 3D Land" goes on sale in November, and "Mario Kart 7" hits stores in December.
The company bases its earnings on Japanese accounting standards.
Its new earnings projection is based on a revised exchange rate assumption of 80 yen to the dollar.