text: Nintendo Co. (7974) President Satoru Iwata said the maker of video-game machines is considering a new business model after forecasting a surprise 25 billion-yen ($240 million) annual loss because of tepid demand for the Wii U. 
   
   Nintendo fell the most in more than 12 years in the U.S. yesterday. The company had previously projected profit of 55 billion yen for the year ending March as it counted on Christmas shoppers to revive sales of the Wii U console featuring games with iconic characters Mario and Zelda. Nintendo cut its forecasts for Wii U console sales to 2.8 million units from 9 million and for Wii U game sales to 19 million units from 38 million. 
   
   The family-focused content of Nintendo is losing its appeal as titles were delayed, casual gamers migrate to mobile devices, and hardcore players opt for the faster Sony PlayStation 4 and Microsoft Xbox One. The owner of Pokemon and Donkey Kong also refuses to offer games with its characters on mobile devices, limiting its ability to profit online players’ surging demand. 
   
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   “We are thinking about a new business structure,” Iwata said at a press conference yesterday in Osaka, Japan. “Given the expansion of smart devices, we are naturally studying how smart devices can be used to grow the game-player business. It’s not as simple as enabling Mario to move on a smartphone.” 
   
   Photographer: Patrick Fallon/Bloomberg Attendees use the Nintendo Co. Wii U console at the E3 Expo in Los Angeles. Close Attendees use the Nintendo Co. Wii U console at the E3 Expo in Los Angeles. Close Open Photographer: Patrick Fallon/Bloomberg Attendees use the Nintendo Co. Wii U console at the E3 Expo in Los Angeles. 
   
   Nintendo American depositary receipts fell 17 percent to $14.90 yesterday New York, their biggest decline since September 2001. Each ADR equals 0.125 underlying shares. 
   
   Nintendo declined 2.8 percent to 14,645 yen yesterday in Tokyo, before the announcement. The shares advanced 54 percent last year. 
   
   Apple, Samsung 
   
   The new forecast for the Wii U is less than the 3.45 million units sold the previous fiscal year. The Kyoto, Japan-based company also cut its forecast for operating income to a 35 billion-yen loss from the prior 100 million-yen profit. 
   
   Projections for sales of its handheld 3DS player were cut to 13.5 million units from 18 million, and for sales of 3DS games to 66 million units from 80 million. 
   
   Nintendo posted a quarterly loss of 8 billion yen in October after cutting the price of the console in the face of new machines from Sony Corp. (6758) and Microsoft Corp. Iwata is trying to lure consumers who prefer playing games on mobile devices from Apple Inc. and Samsung Electronics Co. (005930) 
   
   More Pressure 
   
   “The video-game market has moved into smartphones and tablets,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co. in Tokyo. “Nintendo needs to expand from their current hardware business model. It’s a structural problem.” 
   
   Photographer: Scott Eells/Bloomberg Customers play Nintendo Co. Wii U video games inside a Nintendo World store in New York. Close Customers play Nintendo Co. Wii U video games inside a Nintendo World store in New York. Close Open Photographer: Scott Eells/Bloomberg Customers play Nintendo Co. Wii U video games inside a Nintendo World store in New York. 
   
   The revisions increase the pressure on Iwata, who vowed in October to meet a forecast of 100 billion yen in full-year operating profit and 9 million units in Wii U sales. Nintendo has lost about 80 percent of its market value since the introduction of the original Wii drove shares to a record high of 72,100 yen in November 2007, according to data compiled by Bloomberg. 
   
   Its market capitalization is about $20 billion -- less than Samsung’s previously announced capital expenditures. 
   
   “The revision is much worse than expected,” Yusuke Tsunoda, an analyst at Tokai Tokyo Securities Co. in Tokyo, said by phone. “It’s going to be a third consecutive annual operating loss and that raises a serious management issue.” 
   
   Iwata said any announcement about a pay cut would come later this month when the company releases third-quarter earnings. There are no plans to reshuffle management in the near term, he said. 
   
   Lower Dividend 
   
   The company reduced its planned dividend for the fiscal year to 100 yen from 260 yen. Nintendo revised its foreign-exchange assumptions to 100 yen to the dollar from 90 yen, and to 140 yen per euro from 120 yen. 
   
   “We were unable to sufficiently take advantage of the weaker yen,” Iwata said. 
   
   Even with new titles including “Pikmin 3,” Nintendo failed to capitalize on U.S. video-game product sales that surged to their highest in three years in December. 
   
   Hardware sales increased 28 percent to $1.37 billion from a year earlier, Port Washington, New York-based NPD Group Inc. said on Jan. 16. The tally, the highest since spending hit $1.84 billion in December 2010, drove total retail sales for the industry to their fifth straight monthly gain. 
   
   Price Cut 
   
   The Wii U features a tablet-like, 6.2-inch touchscreen controller that lets players connect wirelessly to the console and shift the display between the device and a television. The consoles compete in a market where smartphone sales are on track to exceed 1 billion units this year, researcher IDC said Oct. 29. 
   
   The Wii U’s price in the U.S. was cut by $50 to $299.99 on Sept. 20, while the Japanese price remained a suggested 30,000 yen. 
   
   Nintendo introduced the 2DS portable machine, resembling a tablet, in October for $129.99 to lure first-time and casual gamers. 
   
   The global video-game market may reach $111 billion by 2015, researcher Gartner Inc. said Oct. 29. Mobile games are the fastest-growing segment, with revenue set to reach $22 billion by 2015 from $13.2 billion this year, Gartner said. 
   
   “We cannot continue a business without winning,” Iwata said. “We must take a skeptical approach whether we can still simply make game players, offer them in the same way as in the past for 20,000 yen or 30,000 yen, and sell titles for a couple of thousand yen each.” 
   
   To contact the reporters on this story: Masatsugu Horie in Osaka at mhorie3@bloomberg.net; Takashi Amano in Tokyo at tamano6@bloomberg.net 
   
   To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net ||||| Logos are seen on Nintendo Co's Wii U game console (bottom) and its controller at the company's headquarters in Kyoto, western Japan in this January 7, 2013 file photo. 
   
   TOKYO Nintendo Co Ltd said on Friday that sales of its Wii U consoles had flopped, pushing it to a third consecutive annual loss and raising a question mark over its future in a home console market increasingly dominated by Sony Corp and Microsoft Corp. 
   
   The company that got its start making playing cards more than a century ago slashed its global Wii U sales forecast for the year to March 31 by almost 70 percent to 2.8 million units. It cut its sales forecast for its handheld 3DS to 13.5 million units from 18 million. The Wii U is the successor to its hit Wii console. 
   
   Nintendo's president, Satoru Iwata, who last year pledged to return the hobbled game maker to profit this business year, apologized to shareholders at a briefing in Osaka, but said his failure to fulfill his promise did not mean he had to resign. 
   
   "There will be no major management shake-up in the short term," Iwata told reporters. 
   
   Pressure will likely mount on the architect of the Wii success in 2006 to step aside or shift course to focus on making money from "Super Mario" and other software titles. Nintendo so far has refused to allow its games to be played on machines built by competitors or on tablets or other mobile devices that are used by gamers. 
   
   In the past the company has blamed a lack of titles for poor sales, but even its popular family-friendly games are losing out on sales to more hard-core titles like "Grand Theft Auto" played on rival machines. 
   
   "The fact that the 'Wii U strategy' has failed is disappointing and will likely trigger a sell-off as soon as the market opens," said Makoto Kikuchi, chief executive of Myojo Asset Management. 
   
   Nintendo this business year now expects an operating loss of 35 billion yen ($335.76 million) compared with an initial forecast for a 100 billion yen profit. The new estimate also falls drastically short of the average forecast of a 54.7 billion yen profit in a survey of 18 analysts by Thomson Reuters I/B/E/S. 
   
   The latest warning comes just three months after the Japanese company reiterated its sales projections for the Wii U, counting on the console to revive its fortunes as Microsoft released its new XBox One and Sony released its PlayStation 4 to the public. 
   
   "We failed to reach our target for hardware sales during the year-end, when revenues are the highest," said Iwata. 
   
   In 2006, Iwata was celebrated worldwide after creating a new niche with the Wii console designed for the whole family to use rather than hardcore gamers. That success boosted Nintendo's cash pile to around $14 billion, money it will have to dip into again to help cover its latest deficit. 
   
   Nintendo on Friday also warned of a net loss of 25 billion yen for the year ending on March 31, a substantial reversal from its prior projection of a 55 billion yen profit. It now expects revenues of 590 billion yen, down 36 percent from its prior forecast. It cut its full-year dividend to 100 yen from 260 yen. 
   
   Nintendo shares have fallen almost 10 percent since hitting a two-and-a-half year high of 15,880 yen on January 10. The stock climbed 55 percent in 2013, in line with a 57 percent rally by the benchmark Nikkei average but underperforming a 91 percent surge by rival Sony. 
   
   ($1 = 104.2400 Japanese yen) 
   
   (Additional reporting by Ayai Tomisawa, Dominic Lau and Reiji Murai; Writing by Tim Kelly; Editing by Edmund Klamann and Matt Driskill)
target: – Nintendo's console business might be on its last life. The company today slashed its Wii U sales forecast for the year ending in March by a staggering 70%, anticipating sales of just 2.8 million units, Reuters reports. It also halved its projection for Wii U game sales to 19 million units, and dropped its 3DS forecast from 18 million to 13.5 million. The numbers are especially bad, because the second year of sales is typically a peak period for consoles, the Wall Street Journal points out. "We are thinking about a new business structure," President Satoru Iwata said in an apologetic news conference, according to Bloomberg. He said the company wanted to take advantage of mobile gaming, but "it's not as simple as enabling Mario to move on a smartphone." Some analysts say the company is investing heavily in research and development, and could even have a new console in the works. Despite losing money for now three years in a row, the company is sitting on $4.44 billion in cash.