Production Concerns Determined 3DS Timing, Nintendo Slashes Forecasts

When Nintendo outlined some of its 3DS launch plans today at a Tokyo press briefing, it came as a surprise to some analysts that the company's February 26 rollout in Japan will miss the holiday window. The later launch led the company to make drastic cuts to its profit forecast -- and may also portend supply constraints for the U.S. launch, one analyst says. "Given the later launch of the 3DS in Japan, we note that shipment quantities to the U.S. next spring might be more constrained than originally anticipated," says Lazard Capital Markets analyst Colin Sebastian. MF Global FXA Securities analyst Jay Defibaugh wasn't as temperate, telling the Wall Street Journal that the announcement was a "worst-case scenario." Defibaugh had also hoped for a 2010 launch, a 3G wireless connection, and a ¥20,000 ($240) price point versus the ¥25,000 ($299) Nintendo revealed. According to the report, Nintendo president Satoru Iwata told analysts the company had in fact been shooting for a year-end release for the 3DS, but delayed the launch due to concerns it wouldn't be able produce enough units to meet the season's demand. Nintendo says it's expecting four million 3DS units sold by the end of its 2011 fiscal year -- which since the company's year ends in March 2011, translates to a prediction of first-month sales. The company expects the device's Western launch to occur in March, as well. In the same window, the company's predicting 15 million software units sold specifically for the 3DS, excluding units on other DS platforms. Nintendo has already been somewhat challenged by declining software sales and a strong yen -- the latter factor in particular has been a significant challenge to the coffers of most Japanese companies -- but the forward movement of the 3DS means the company must reduce its profit forecasts even more drastically, as the device's launch was expected to provide a much needed antidote to lags in the DS and Wii market. It now expects a fiscal year profit of ¥90 billion ($1.08 billion) -- a drastic reduction on May's ¥200 billion ($2.4 billion) forecast. It also reduced expectations for both hardware and software unit sales for Wii and DS: instead of the previously-forecast 30 million, Nintendo now plans to ship 23.5 million DS hardware units (including the 3DS), while Wii forecasts came down only slightly from 18 million to 17.5 million. For software, Nintendo reduced DS software sales expectations from 150 million units to 125 million, and Wii software from 165 million to 135 million.