Nintendo Posts Losses, But Remains Bizarrely Optimistic

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Source: Thinkstock

Source: Thinkstock

The past few years have not been kind to Nintendo or its investors. For the third year in a row, the Japanese gaming company posted an annual operating loss. According to their fourth-quarter report released today, Nintendo saw a 10 percent decline in sales over the past fiscal year, and an operating loss of $457 million. It remained optimistic about the year ahead, but based on the strategy it has outlined so far, that optimism seems unwarranted.

This year’s underwhelming results are largely due to lower-than-expected interest in its two current gaming systems, the Wii U and the Nintendo 3DS. In January, the company adjusted its sales expectations for the year down for both the Wii U and 3DS. The actual figures were slightly worse than even those lowered expectations, as the Wii U sold 2.7 million, and the 3DS sold 12.24 million. When you factor in the other Nintendo hardware currently for sale — like the original Wii and the cheaper Nintendo 2DS — between April 2013 and March 2014, Nintendo sold 3.94 million consoles and 22 million handheld gaming devices. Overall, hardware sales are down 20 percent from last year.

When compared to the competition, Nintendo’s console sales look especially paltry. Over the last six months — half the time it took Nintendo to sell nearly 4 million consoles — Microsoft (NASDAQ:MSFT) shipped 5 million units of the Xbox One to stores, while Sony (NYSE:SNE) sold 7 million PlayStation 4s to customers. It’s worth noting that the Wii U is significantly less powerful than either of those systems, which could help explain things. However, the original Wii was similarly underpowered compared to its competition from the same companies, and it managed to outsell them both by a substantial margin.

The one bright side is that Nintendo’s software sales increased 7 percent over last year. That’s the morsel Nintendo is clinging to in order to appear optimistic about the coming fiscal year. It admits that it faces a “challenging sales situation,” but still remains confident that it can manage $393 million in operating income, with the help of upcoming games like Mario Kart 8 and Super Smash Bros.

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