Nintendo staking everything on Wii U sales
Nintendo President Satoru Iwata is convinced the future of gaming still centers on handheld and TV-based machines. He'll get his answer by Christmas, in the number of new Wii U consoles that get bought.
Iwata can't afford to be wrong. Nintendo, the world's biggest maker of video-game machines, last year cut prices on its 3-DS handheld device after shipments missed forecasts, handing the company its first annual loss.
Like a character in one of Nintendo's Super Mario Bros. games, Iwata is battling a storm of life-sapping obstacles: shrinking hardware sales, more people playing on smartphones and the Internet, and uncompetitive costs.
"The Wii U's performance will be a gauge of whether there's still a need for consoles to exist," said Makoto Kikuchi, chief executive officer at Myojo Asset Management Japan Co., a Tokyo-based hedge fund advisory firm. "If it doesn't go well, Iwata may have to find a new business model." That's something Iwata, 52, has vowed he won't do, making the entrance of the new Wii console a pivotal moment for the Kyoto-based company. As the first home-gaming machine introduced by any global player since 2006, the Wii U also provides a marker for the industry as a whole.
The company is holding a media event to preview the machine tomorrow in New York. While no date has been set for the Wii U to go on sale, Nintendo said it wants to introduce the device in time for the end-of-year shopping season.
Wii U Nintendo forecasts a return to profit this year as it introduces the Wii U, which will feature a 6.2-inch touch-screen controller. Net income will be $257 million, reversing last year's loss, the company projects.
The company also predicts a 37 percent jump in 3-DS sales. It sold 13.5 million 3-DS machines last fiscal year, compared with an initial projection of 16 million, it said in April.
Iwata has said software titles will help drive sales of the new console.
The 3-DS was hobbled by a lack of attractive titles, he said in April.
Lackluster demand for the 3-DS, which can beam images in 3-D led to Nintendo posting both operating and net losses in the year ended March 31 -- the first time that's happened since the company went public in 1962. The Americas and Europe accounted for 72 percent of sales, according to its earnings statement.
"We failed to prepare a software lineup which could satisfy our customers," Iwata told analysts in Tokyo on April 27. "We have learned the lesson that we have to make that kind of preparation for the Wii U." 'Failed to Prepare' The new machine will probably come with blockbuster game titles including one featuring "Super Mario," said Hiroshi Yamashina, a Tokyo-based analyst at BNP Paribas.
"Nintendo should be able to fare well against smartphones and tablets with its software lineup, which would differentiate its product from other devices," Yamashina said. "Nintendo wants to avoid losing a lot of money this time, after the 3DS experience." The machine is being released in the midst of an industry slump as consumers abandon consoles in favor of games played on smartphones and social-networking sites including Facebook Inc. When Nintendo introduced its last home video-game console, the Wii, in 2006, Apple Inc.'s iPhone hadn't yet gone to market, the game Angry Birds didn't exist and social-gaming company Zynga Inc. hadn't been founded.
Winning customers with its motion-sensor controls, the original Wii sent Nintendo's shares to a peak in November 2007. The shares rose on Asian markets Wednesday, but they are down 15 percent this year, compared with a 63 percent gain for Apple.