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What caused their fisical operation income forecast being halved?

http://www.nintendo.co.jp/ir/pdf/2015/150128_3e.pdf

Based on the sales performance for the nine months ended December 31, 2014 and afterwards, net sales and operating income are expected to be lower than our original forecasts.

Basically their video game business is selling worse than what they hoped for.

However:

Also, considering recent trends in foreign currency exchanges, assumed exchange rates for the fourth financial quarter as well as at the end of the full fiscal year have been revised as follows: 115 yen per U.S. dollar (previous rate: 100 yen), 130 yen per euro (previous rate: 140 yen). As a result, we have revised up the ordinary income and net income forecasts.

The strong climb of the Dollar in the past few months means they can go in their spreadsheets and increase the Yen value of their bank investments kept with the American currency. Thus, the increase in forecast Net Income, despite worse sales and Operating Income.

Exemplifying the foreign exchange situation, if Nintendo had:

- in June 30, 2014, 1 billion dollars in a bank = 100 billion yen.
- today, that same 1 billion dollars = 115 billion yen.

So, they declare profit of 15 billion yen from foreign exchange.

As a matter of fact, Nintendo profit in the last 9 months has been:

31.6 billion yen from selling video games
51.1 billion yen from foreign exchange

Regardless of foreign exchange, their cost cutting and accounting measures were effective, because, despite selling worse this fiscal year, their video games have turned a profit, when in the last fiscal year they had lost 1.6 billion yen in the first 9 months.

 

[ArchangelWest]

It is. It's very unlikely to beat 2014 in absolute numbers - and except for animal crossing all top selling IP are released on the console.

At this exact point in time last year, there was still a chance. It was possible mario kart and smash were the extra success Wii U needed to have that mainstream appeal and finally start selling. By now that moment is gone. There is slight growth in the west (which was expected with these anticipated titles), but in Japan they did (relatively) nothing, and Wii U declined.

WiiU at around 15m LTD when all is said and done (2017) is a stable guess. But there is no factor or element at all, neither historically and/or potentially that we know of that indicates 20m is possible at the moment.

You speak as though everyone who wants Smash Bros and Mario kart already have a Wii U. They don't. Those games have astronomical attach rates, and continue to sell over time. That's a lot of traction and word of mouth compared to what the console had previously. Games like Animal Crossing, Star Fox, Zelda U, and Splatoon, along with ever growing Amiibo interest will only continue to add to appeal. A well timed but semi-conservative price cut, $50 or so will spur things even further, and would be a far cry from the bare bones, 'Please! Somebody buy me!' price cut which the GC had.

 

[guek]

Guaranteed.

I'd be surprised if it cracks 15 million by the end of its life. They sold 3.34 million Wii Us in what will likely be the biggest year for the console. If they can somehow maintain those numbers for the next two years, they crack 15 million. But they don't have another Smash Bros coming. Or Mario Kart. Or Mario. So I can't see it happening.

Zelda this year.

Several B level franchises + animal crossing in 2016

Mario game with new console in 2017

I think they'll just about crack 15 mil by then

 

[Palette Swap]

I knew there was a slump in 3DS HW sales but I hadn't realized this was shaping up to be its worst FY, regardless of N3DS.

I reckon it's somewhere between DS and PSP ?

 

[shinra-bansho]

I knew there was a slump in 3DS HW sales but I hadn't realized this was shaping up to be its worst FY, regardless of N3DS.

I reckon it's somewhere between DS and PSP ?

Lifetime? It won't get close to PSP numbers, probably a good 10-15M less.

The PSP ended up at 80M units.

 

[AniHawk]

I knew there was a slump in 3DS HW sales but I hadn't realized this was shaping up to be its worst FY, regardless of N3DS.

I reckon it's somewhere between DS and PSP ?

below both. dedicated handhelds this gen won't reach psp numbers.

 

[_Clash_]

Sounds like some good Nintendo news!

2015 will hopefully result in some great games from Nintendo.

 

[MrSaturn99]

Dammmmnn at Smash/Pokemon numbers.

Always feels good to know the latter is still going strong nearly two decades later.

 

[zomgbbqftw]

Lifetime? It won't get close to PSP numbers, probably a good 10-15M less.

The PSP ended up at 80M units.

But it entered beast mode! Surely it can beat the failure that the PSP was in beast mode.

 

[vinnygambini]

But it entered beast mode! Surely it can beat the failure that the PSP was in beast mode.

powerhouse™

 

[GhostTrick]

But it entered beast mode! Surely it can beat the failure that the PSP was in beast mode.

Why not ?

 

[Memory]

2017 seems like the launch date of a new traditional console. i don't think their next console will be a traditional one though. the soonest we'd probably see it is 2016 with the launch of the new handheld. the 3ds will be over 5 years old in late next year and nintendo would be wise to just end it before things really get embarrassing.

that said, 2015 and 2016 will probably be rocky periods unless the wii u and 3ds software is really popular and qol actually takes off. r&d of these new systems will probably be well underway at that point, and they probably won't make any money on them for a while.

If their next system is traditional there is no way they are releasing it earlier than Fall of 2017. X1 and PS4 will be in their prime and have healthy attractive libraries (even the Wii U will). No ones going to invest in a new Nintendo console so soon after the Wii U debacle unless they have something amazing up their sleeves.

I expect a new handheld and a lot of small-medium sized Wii U games before Nintendo risk entering the next gen early and ill prepared again.

If your right and they do something non traditional all bets are off on when they do it amd how it turns out.

 

[Kysen]

As long as Abe keeps the printing press running Japan inc will be fine.

 

[Shaanyboi]

What's good is that it shows Nintendo have its own market. They can be autonomous forever (If they play their cards right). They don't need the rest of the industry.

This is a poisonous assumption... Yes they have their own market, but that market will continue to dwindle unless they make active and aggressive attempts to reach outside their core fanbase.

 

[Kinan]

Added FY Gamecube data to have that gen complete. If anyone could point me to the quarterly GC data, I would appreciate. Do not really want to dig through all Nintendo financial reports.

 

[guit3457]

As long as Abe keeps the printing press running Japan inc will be fine.

Sure sure, just wait for SONY results...it's going to be a bloodbath

 

[lefantome]

http://www.nintendo.co.jp/ir/pdf/2015/150128_3e.pdf

Based on the sales performance for the nine months ended December 31, 2014 and afterwards, net sales and operating income are expected to be lower than our original forecasts.

Basically their video game business is selling worse than what they hoped for.

However:

Also, considering recent trends in foreign currency exchanges, assumed exchange rates for the fourth financial quarter as well as at the end of the full fiscal year have been revised as follows: 115 yen per U.S. dollar (previous rate: 100 yen), 130 yen per euro (previous rate: 140 yen). As a result, we have revised up the ordinary income and net income forecasts.

The strong climb of the Dollar in the past few months means they can go in their spreadsheets and increase the Yen value of their bank investments kept with the American currency. Thus, the increase in forecast Net Income, despite worse sales and Operating Income.

Exemplifying the foreign exchange situation, if Nintendo had:

- in June 30, 2014, 1 billion dollars in a bank = 100 billion yen.
- today, that same 1 billion dollars = 115 billion yen.

So, they declare profit of 15 billion yen from foreign exchange.

As a matter of fact, Nintendo profit in the last 9 months has been:

31.6 billion yen from selling video games
51.1 billion yen from foreign exchange

Regardless of foreign exchange, their cost cutting and accounting measures were effective, because, despite selling worse this fiscal year, their video games have turned a profit, when in the last fiscal year they had lost 1.6 billion yen in the first 9 months.

are they going to count them as profits every year quarter/year?

if they still own the "billion dollars" will it count again as profit next quarter or will they use the difference of its value in Yen from the previous quarter?

 

[mclem]

Console and game sales:

Wii U seems to sell an awful lot of software given how much hardware is out there. There's 5 times as many 3DSes, but only 4 times as much 3DS software.

 

[noshten]

I wanted to find out how many of those 4.77 million people who bought MK8 also got the DLC pack. I don't normally purchase DLC but that was quite the value - some of the new tracks are wonderful online(F the new Rainbow Road thought).

Nintendo should continue with these types of DLC's for MK8, SSB and other titles if they are able to provide a good value a lot of the people who buy those games will get the DLC.

 

[AniHawk]

Wii U seems to sell an awful lot of software given how much hardware is out there. There's 5 times as many 3DSes, but only 4 times as much 3DS software.

both software to hardware ratios are about normal for their respective kind of platform. wii u will probably wind up at around 8-9:1 as with most nintendo consoles, and the 3ds is already around 4-5:1 as with the gb/c and the gba.

 

[mclem]

What they need to do is produce unique experiences for these series for the handheld and home console, with a link between them, not just plop the exact same title across both formats.

The problem comes when the workload for making a 'unique experience' defeats the advantage of the cross-platform development.

 

[Palette Swap]

Lifetime? It won't get close to PSP numbers, probably a good 10-15M less.

The PSP ended up at 80M units.

below both. dedicated handhelds this gen won't reach psp numbers.

Thanks guys, I guess I hadn't fully realized how much that market has shrunk.
(I wasn't implying PSP didn't do well)

 

[mclem]

More proof that Microsoft is an Evil Empire: The Xbox One is slowly morphing into a TIE Fighter.

 

[KingSnake]

The problem comes when the workload for making a 'unique experience' defeats the advantage of the cross-platform development.

And even more when that means droughts on both platforms. In the end there are already "unique experiences" for each platforms: one has portability and cheaper games while the other has better graphics and bigger scopes for games. I would rather see games coming from the same "seed" like SSB or MK7/8 coming in parallel to both handheld and console and using the resources and time to develop more games for both and have a better release schedule than Wii U and 3ds had since launch. Having lots of game defeats having "unique experience" in terms of selling the HW, as Wii U clearly showed.

 

[shinra-bansho]

are they going to count them as profits every year quarter/year?

if they still own the "billion dollars" will it count again as profit next quarter or will they use the difference of its value in Yen from the previous quarter?

I assume they revalue their currency holdings quarterly and the delta contributes to net income.

I don't think they actually realise any of their gains or losses from exchange rate fluctuation, so I've never really gotten why they recognize it as income or loss, but someone more versed on accounting standards can probably clarify or correct.

They will recognise the portion they intend to use in the coming year. That's why in the comprehensive income statement there are unrecognised FX gains.

Ah, okay. That makes sense.

 

[zomgbbqftw]

I assume they revalue their currency holdings quarterly and the delta contributes to net income.

I don't think they actually realise any of their gains or losses from exchange rate fluctuation, so I've never really gotten why they recognize it as income or loss, but someone more versed on accounting standards can probably clarify or correct.

They will recognise the portion they intend to use in the coming year. That's why in the comprehensive income statement there are unrecognised FX gains.

 

[lefantome]

They will recognise the portion they intend to use in the coming year. That's why in the comprehensive income statement there are unrecognised FX gains.

so are athey planning to use a big chunk of them in FY 2015? that's interesting.

 

[Refreshment.01]

So with Nintendo's decision to only release the New 3DS XL in the US, I thought it might be interesting to look at 3DS SKU percentages by region

Region   | %OG3DS | %3DSXL |  %2DS  |
-------------------------------------
Japan    | 58.70% | 41.30% |   NA   |
Americas | 51.94% | 37.75% | 10.32% |
Other    | 48.70% | 38.11% | 13.20% |

I took out the sales of New 3DS's as they didn't seem pertinent.

Breakdown isn't that interesting although it appears "Others" market [I would assume mostly Europe] seems to have responded better to the 2DS than the "Americas" market has and that "Americas" has responded the least to the larger model thus far, at least relatively speaking. Wonder if that might be why we're only getting the N3DSXL at first.

These figures are the most surprising ones to me from this thread.

Going by the weekly Japan numbers and Nintendo heavy emphasis (promotion wise) for the XL in other regions, i thought that even with a year less in the market the XL would be close or surpassed the original model. But this proves otherwise.

i think the reason for New XL only is that Nintendo gets better margins for the device.

 

[zomgbbqftw]

so are athey planning to use a big chunk of them in FY 2015? that's interesting.

Well for investments and time release deposits, not for operational purposes.

 

[stilgar]

Wii U won't get anywhere near 20 million.

I think it's excessive to dismiss the possibility of the Wii U doing 15-18 millions when all is said and done.

 

[ZSaberLink]

Smash & Pokemon #s are pretty decent, along with Mario Kart 8. Everything else is ok at best.... Profits are good, but the actual increase in hardware isn't that much all things considered. Seems like the Americas are mostly carrying the Wii U however based on what the pdf says (especially in software). Cut the hardware price in the US/Americas, JP is hopeless, and maybe try something in Europe (like France/Germany) if they care.

Software this FY so far on Wii U:
JP - 2,850,000
Americas - 12,270,000 - The one relatively decent # for the Wii U imo. (although it's like half than nearly all the GC software sales of a similar timeframe T_T).
Other - 5,470,000

 

[mStudios]

Are those smash bros copies shipped or sold? if they're shipped, how many has sold in total (both version)?

 

[Eolz]

Nice results, disappointing sales.
Can't wait for the investors presentation and Q&A, there's always some interesting stuff about their future (and some ridiculous questions).

 

[qizah]

My QOL is ready

Also 2016 new handheld and 2017 new console with hybrid architecture incoming

Ninty ninth gen is gonna be interesting

People keep thinking/saying this but I think it's too early for a successor for both platforms.

2016 for 3DS seems too early since it's just getting it's first revision now. I also don't feel like they need an entirely new handheld yet. The 3DS -- especially with the N3DS -- doesn't feel like it needs an upgrade now, plus they have quite a few pieces of software coming still for this year.

2017 for a new console seems more likely, I'd be willing to bet the Wii U gets a successor before the 3DS does.

 

[Yoshi]

They still haven't had a pricecut though.

They have, the system started at 350€ and now is at 300€ (both with game included, but in the beginning it was just Nintendo Land, now it's relevant games like Mario Kart or NSMBU). Though I agree, the biggest thing they could do is drop the price considerably later down the road. This could in particular prove helpful with gathering the young crowd a lot more and establishing the system as the go-to platform for kids-oriented, colourful or platformy games. Continuing selling the system at the same price as Xbox One will not be a viable option for the future. Considering the rate at which GameCube dropped in price (and considering the low price it started at), I think there still is quite a bit of room left for expansion. Eventually reaching 15 million does not seem impossible to me.

 

[AniHawk]

People keep thinking/saying this but I think it's too early for a successor for both platforms.

2016 for 3DS seems too early since it's just getting it's first revision now. I also don't feel like they need an entirely new handheld yet. The 3DS -- especially with the N3DS -- doesn't feel like it needs an upgrade now, plus they have quite a few pieces of software coming still for this year.

2017 for a new console seems more likely, I'd be willing to bet the Wii U gets a successor before the 3DS does.

dsi hit in the us two years before the 3ds came out. a fall 2016 launch for their next handheld really shouldn't be out of the question. the one thing i keep trying to line up is who will actually work on the lineup. retro, ead tokyo, and maybe spd seem like the best candidates. ead 1 is probably doing a 2017 mario kart, and ead 5 is proooobably the qol group now. beyond that are more question marks. next-level is one that could have something for 2016 on the 3ds to help with the drought, or they could be working on something for 2017 for the new platform.

 

[Nothing1016]

People keep thinking/saying this but I think it's too early for a successor for both platforms.

2016 for 3DS seems too early since it's just getting it's first revision now. I also don't feel like they need an entirely new handheld yet. The 3DS -- especially with the N3DS -- doesn't feel like it needs an upgrade now, plus they have quite a few pieces of software coming still for this year.

2017 for a new console seems more likely, I'd be willing to bet the Wii U gets a successor before the 3DS does.

NA: Nintendo DSi XL - March 28, 2010 -----> Nintendo 3DS - March 27, 2011

So its not unheard of for Nintendo. This is also one of my theories for why they are not bringing over the regular New 3DS. Don't want to waste time with the regular model when the successor is right around the corner so they might as well release the better selling one to get as many sales as possible without sacrificing profit.

 

[airmangataosenai]

To put the numbers into perspective for people still holding on to the idea of the Wii U hitting 20 million: the system would have to match this years predicted sales (Which they're going to miss anyway) for the coming 3 fiscal years until March 31, 2018 to reach that goal. It would have to match the sales of the year they launched Mario Kart and Smash with no decline at all.... do people really not understand why that's impossible?

 

[AniHawk]

To put the numbers into perspective for people still holding on to the idea of the Wii U hitting 20 million: the system would have to match this years predicted sales (Which they're going to miss anyway) for the coming 3 fiscal years until March 31, 2018 to reach that goal. It would have to match the sales of the year they launched Mario Kart and Smash with no decline at all.... do people really not understand why that's impossible?

someone clearly doesn't understand the one-two combo that is xenoblade chronicles x and splatoon. also, amiibo.

 

[allan-bh]

People keep thinking/saying this but I think it's too early for a successor for both platforms.

2016 for 3DS seems too early since it's just getting it's first revision now. I also don't feel like they need an entirely new handheld yet. The 3DS -- especially with the N3DS -- doesn't feel like it needs an upgrade now, plus they have quite a few pieces of software coming still for this year.

It's not early, 3DS sales are falling (5.22m drop in 2014 calendar year). 2015 is likely the last healthy year for the system. In 2016 sales probably will be at a very low standard for a Nintendo handheld.

 

[shinra-bansho]

Eh.. there's some merit to the idea that a lower price point will push some potential consumers to purchase.

But I don't foresee that actually maintaining this year's shipments, or raising them. If anything, I see it as necessary to simply soften declines.

I also see profitability as the primary focus right now. So the degree of price cut that seems feasible is reduced.

 

[Scully Scully Scoo]

why are some on here acting like these numbers are good? beating expectations doesnt mean shit when expectations are so low. garbage performance from wiiu considering they released all their big hitters last year

 

[Seiniyta]

They have, the system started at 350€ and now is at 300€ (both with game included, but in the beginning it was just Nintendo Land, now it's relevant games like Mario Kart or NSMBU). Though I agree, the biggest thing they could do is drop the price considerably later down the road. This could in particular prove helpful with gathering the young crowd a lot more and establishing the system as the go-to platform for kids-oriented, colourful or platformy games. Continuing selling the system at the same price as Xbox One will not be a viable option for the future. Considering the rate at which GameCube dropped in price (and considering the low price it started at), I think there still is quite a bit of room left for expansion. Eventually reaching 15 million does not seem impossible to me.

The question is how much they realistically can drop the price. The gamepad is an expensive part of the system and I wonder how much they can reduce costs on that still.

 

[1st Course]

For a little perspective on Game Cube sales, GC released in 2001. By late 2003, they had dropped the price to $99. Also, at this point in both consoles history, GC was slightly ahead. So while perhaps Wii U won't sell as much as the Game Cube, it's not absurd to believe that it may get to around 20 million for its life time. Also, if the console gets a truly killer app, all of that goes out of the window.

Margins on 3DS/WIIU are not that hot compared to Nintendo's past systems. Back then Nintendo was able to do price cuts with ease and still maintain profitability, now even without price cuts they still struggle to post profit.

 

[Plinko]

why are some on here acting like these numbers are good? beating expectations doesnt mean shit when expectations are so low. garbage performance from wiiu considering they released all their big hitters last year

Decent profit. Hardware sales aren't great, but when a company makes profit most people look at it as positive.

 

[V_Arnold]

why are some on here acting like these numbers are good? beating expectations doesnt mean shit when expectations are so low. garbage performance from wiiu considering they released all their big hitters last year

Luckily, reality is a bit more interesting than the bipolar views of "garbage" and "stellar". Wii U's sales are not garbage. Look up the console failures of the 90's if you want garbage.

 

[allan-bh]

For a little perspective on Game Cube sales, GC released in 2001. By late 2003, they had dropped the price to $99. Also, at this point in both consoles history, GC was slightly ahead. So while perhaps Wii U won't sell as much as the Game Cube, it's not absurd to believe that it may get to around 20 million for its life time. Also, if the console gets a truly killer app, all of that goes out of the window.

Honestly it is absurd. And at the end of 2003 Cube was at 13.94m, so was not "slighty" ahead.

 

[Refreshment.01]

The question is how much they realistically can drop the price. The gamepad is an expensive part of the system and I wonder how much they can reduce costs on that still.

What's the estimated cost of the Gamepad?

 

[Goodlife]

What's the estimated cost of the Gamepad?

I'd imagine it's pretty low.
Most of the clever stuff (getting a 60FPS / lagless display) is done in the WiiU anyway, the gamepad is just a dumb terminal.

So even if you did a gamepad less version of the WiiU and sold the pad as optional you'd still have to include the clever stuff in the WiiU

 

[Refreshment.01]

Zelda this year.

Several B level franchises + animal crossing in 2016

Mario game with new console in 2017

I think they'll just about crack 15 mil by then

How does a Pokken with a full RPG esque adventure mode for Wii U sounds for you. B level?

It could potentially go for more than 2 million units. And even be present at the release of the next portable.

I'd imagine it's pretty low.
Most of the clever stuff (getting a 60FPS / lagless display) is done in the WiiU anyway, the gamepad is just a dumb terminal.

So even if you did a gamepad less version of the WiiU and sold the pad as optional you'd still have to include the clever stuff in the WiiU

i like to ask the question because even cheap tablets with more components than the Gamepad can be had for close to 50. Don't thing it'll make much of a difference to the Wii U sales to pay 50 or so less.

A Gamepad type controller also could tie in to Nintendo future plans for the next console, what is sold as the Wii U Pro today, could become the Gamepad in the future.