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Nintendo Drops Forecast From 55 Billion Profit To A 25 Billion Loss


Nintendo Drops Forecast From 55 Billion Profit To A 25 Billion Loss

Everyone sort of knew Nintendo wasn’t coming out 100% ahead in the financial department when it came to the disastrous performance of the Wii U, but we had to assume they were buoyed by the immense success of the Nintendo 3DS. Turns out, we may have been optimistic, because nothing less than doomsday numbers are coming out of Nintendo this morning, reporting a new financial forecast that cuts expectations from a 55 billion yen profit to a 25 billion yen loss.

They cite, in this financial report, the following reasons for the drastic change;

In the year-end sales season which constitutes the highest proportion of the annual sales volume, software saleswith a relatively high margin were significantly lower than our original forecasts mainly due to the fact thathardware sales did not reach their expected level. As a result, the total of selling, general and administrativeexpenses will surpass gross profit, which leads to an operating loss.

The above obviously refers to the less than stellar sales of the Wii U. They go on;

The reason why we will post ordinary income despite the operating loss situation is that we now assume thatthe yen will be weaker than our original assumptions at the beginning of the fiscal year, which results in foreignexchange gains.

On the other hand, we expect to post a net loss because we need to reverse deferred tax assets in relation to thelosses carried over from the previous fiscal years mainly in the United States, as we can no longer expect ourfinancial performance to recover in the current fiscal year. Exchange rate assumptions for the fourth financial quarter as well as for the end of the full fiscal year havebeen revised from 90 yen to 100 yen per U.S. dollar, and from 120 yen to 140 yen per euro in consideration ofthe recent exchange rate situation.

I am not a financial analyst, not by any stretch of the imagination, but this outlook is not good. A lack of Christmas sales of the Wii U appears to have, combined with a weakening yen,  crippled Nintendo’s economic confidence. Its too soon to see what effect such a prediction will have on Nintendo in even the short term, but now all eyes are upon them to see how they attempt to rectify such a drastic downturn.

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