Wii Sends Nintendo Profits Soaring

By Tucker Reals

January 25, 2007 / 6:42 AM
/ AP

Booming year-end sales of the wand-wielding Wii game console sent profit at Nintendo soaring 43 percent for the nine months ended December, the Japanese manufacturer of Pokemon and Super Mario games said Thursday.

Nintendo Co., which also makes GameBoy Advance and Nintendo DS handheld machines, recorded group net profit of 131.9 billion yen ($1.1 billion) in the first nine months of the fiscal year, up dramatically from 92.2 billion yen the same period a year earlier.

The company did not break down quarterly numbers.

Sales soared 73 percent to 712.6 billion yen ($5.9 billion) during the April-December period from 412.3 billion yen the previous year, the Kyoto-based company said in a release.

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Nintendo's Wii is embroiled in a head-to-head battle in next-generation home game consoles against sector leader Sony Corp.'s PlayStation 3, which has been plagued with production problems.

Wii, inspired by the English word "we," has benefited from its fun image built around the wandlike remote controller that players wave around like a tennis racke, fishing rod, drumstick or gun, depending on the game.

Nintendo said it sold 3.19 million Wii machines worldwide, 1.25 million in the Americas, and 1.14 million in Japan.

The company said it had met its target of 4 million units shipped by the end of 2006 as that number had been manufactured and were still getting distributed, according to spokesman Yasuhiro Minagawa.

He said Nintendo was well on its way to reach its target of global shipment for 6 million Wii machines by March 31, the end of the current fiscal year, and will have manufactured 7 million Wii machines in fiscal 2006.

Earlier this month, Sony said it shipped 2 million PlayStation 3 machines worldwide by mid-January, falling about two weeks behind its initial plan in shipments in Japan. The machine's launch in Europe has been delayed until later this year. Sony is also targeting shipping 6 million PS3 machines by March 31.

Selling machines in high volumes is crucial in the gaming business because hot-selling formats attract software companies to make more games, which in turn boost console sales and often bring in hefty profits for the hardware companies that also make software.

The Wii faced some minor problems early on with its wand, which flew out of the hands of some enthusiastic players, snapping the wrist strap and sometimes crashing into TVs.

But that hasn't dented the company's profits or stopped the Wii from selling well.

A voluntary exchange for a thicker strap for the controller announced in December will cost slightly more than 1 billion yen ($8 million; euro6 million), including costs extending beyond the period covered in Thursday's report, Minagawa said.

Nintendo said it was also marking robust sales with its Nintendo DS portable, totaling 18.88 million units sold worldwide in the first three quarters — the fastest rising game platform ever in the Japan market. The machine is also selling briskly overseas, it said.

In-house game software sales, which are crucial for boosting profitability for game companies, also did well for Nintendo, it said, such as "New Super Mario Bros.," "Brain Age" and "Nintendogs" for DS, and "The Legend Zelda: Twilight Princess," for Wii.

Etsuko Tamura, analyst for Mizuho Investors Securities in Tokyo, said Nintendo was likely to do well through next fiscal year because of a planned strong lineup of game software, such as "Dragon Quest" for DS.

"There's no bad news for Nintendo," she said, shrugging off some doubts that consumers may already be starting to tire of the Wii, partly because of its simplicity. "Nintendo will come up with new kinds of games for Wii."

Easy-to-play games to attract the elderly and other newcomers are likely in the works, including dieting games, said Tamura.

Nintendo also got a boost from the weaker yen, which inflates overseas earnings when repatriated. During the nine months, Nintendo racked up a 26 billion yen ($216 million) foreign exchange gain.

The company kept its full-year forecast unchanged at 120 billion yen ($996 million) profit, despite heftier profits for the nine-month period partly because of the uncertainty of currency fluctuations, on 900 billion yen ($7.5 billion) sales.

Nintendo shares, which have more than doubled over the last year, closed up 1.5 percent in Tokyo at 33,500 yen ($278) shortly before earnings were announced.