Nintendo Lowers Operating Profit Estimates

Officials from Nintendo of Japan have announced that the company is to cut its first half operating profit estimate, while at the same time increasing its net profit estimate. The net profit rise is primarily due to currency-related gains, while the operating profit drop is attributed to poor sales of GameCube hardware and software, as well as the recent Nintendo DS price cuts. First-half operating profit estimates dropped by almost a third, with the company also citing the research and development costs for the next-generation Revolution console as a factor. The company now expects a group operating profit of a still-impressive ¥20 billion ($176.2m) for the six months ended September 30th, with sales estimates decreasing by 8 percent to ¥175 billion ($1.54bn). Talking to the Reuters news agency, Yoshihiro Mori, senior managing director at Nintendo, said the biggest negative factor was sluggish sales of software for the GameCube, as third party developers begin to focus on Revolution titles. Quoted by news agency Reuters, Mori commented that, "The big drop for GameCube games was in North America. It looks like the product's life is nearing its end.” The more positive news for the company, though, was that first half net profit forecasts have been increased from ¥19 billion ($167.4m) to ¥36 billion ($317.2m), due to a revaluation of the company’s U.S. cash assets – a factor that regularly sees Nintendo’s profits vary wildly from year to year due to its large $4.7 billion cash reserves. However, the new net profit figure is still down 23 percent year-on-year. The company has also cut its forecast for operating profit in the full year by 22 percent to ¥90 billion ($793.0m), and its sales forecasts by 4 percent to ¥400 billion ($3.52bn). Full year net profit forecasts are being kept at ¥75 billion ($660.9m), which is below analyst estimates of ¥76.85 ($677.2m).