Nintendo’s Latest Quarter Continues the Trend of Bad News

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Nintendo Co. has had nothing but bad news lately when it comes to its future profit projections.

Lackluster performance in the games division and slowed development of products in the health niche were bad enough, but the company also recently announced that its operating loss doubled in the most recent quarter.

Handhelds selling less. The core of the blame lies with the sluggish sales of the Nintendo 3DS handheld devices, and a number of other smaller factors. This slow quarter marked the latest in three straight years of posted operating losses. Industry watchers are skeptical that the company will be able to reach predetermined sales or profit targets for the remainder of 2014.

Obviously aware of the impact of the news, Nintendo didn’t hold its typical conference call or media briefing, but logged the operating loss without comment. It had a total loss of $92.7 million for the first fiscal quarter, ending June 30. The sales for the Nintendo 3DS declined by 41%, and fell below one million units for the second straight quarter. Handheld software sales dropped 22%. However, Wii U sales tripled to 510,000 consoles during the same period.

Still a profitable outlook. Despite these challenges, the company is sticking to its full-year forecast of a net profit of 20 billion yen and 40 billion yen for an operating profit. These figures are both double the market expectations for net profit and operating profit – and without hardware price reductions, experts say they are completely unrealistic.

Nintendo has had a relatively inconsistent pattern of releasing first-party titles that are native to Nintendo devices. This puts them at a disadvantage in the marketplace. The other game console manufacturers have a full slate of first-party titles and release new games throughout the year. Nintendo has the next generation of “Super Smash Bros.” coming to both the 3DS and Wii U, as well as Pokémon games for the 3DS. But this is unlikely to boost profits any higher.

One potential revenue stream – a push toward health improvement apps or games – has been stalled out. Without some major movement on their existing platforms, or a new health care division, the bad news may, unfortunately, continue for Nintendo.

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