Nintendo Profits Fall As GameCube Sales Drop

Officials from Nintendo have released details of the company’s first half financial results for the six months ended September 30th. During this period the company reported a 21.1 percent decline in net profits compared to the same time last year, partly due to sluggish GameCube hardware sales. Consolidated net profit was ¥36.63 billion ($308.4m), compared to ¥46.45 billion ($391.1m) in 2004, although this was slightly higher than the company’s forecast of ¥36 billion thanks to favorable foreign exchange rates. Operating profit (sales minus the cost of goods sold and administrative expenses) fell 51 percent to ¥19.6 billion ($165.0m). Nintendo’s net income for the first half of the financial year was ¥36.6 billion ($308.1m), down from ¥46.4 billion ($390.7m) a year ago. Sales dropped only 6.2 percent to ¥176.4 billion ($1.49bn). The company now expects to sell 12 million Nintendo DS units worldwide this finanical year, down from previous forecasts of 12.4 million. GameCube sales are also forecast to be 400,000 lower at 2.4 million. However, forecasts for the Game Boy Advance family of products rose from 10.2 million to 11 million. The company cut its first half operating profit estimate in October due to poor sales of GameCube hardware and software, particularly in the U.S., and the impact of recent Nintendo DS price cuts. The fall in profits has also been attributed to research and development costs for the next generation Revolution console. Although a significant fall, Nintendo remains the most consistently profitable console hardware manufacturer when also factoring in game sales, especially compared to nearest rival Microsoft, which is estimated to have lost around $4 billion on the Xbox in the last five years. Nintendo officials are sticking to full year forecasts of operating profit of ¥90 billion ($758m), net profit of ¥75 billion ($631m) and sales of ¥400 billion ($3.4bn).