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Nintendo - the price of competition - 78.5% decrease in operating profits

R

radioheadrule83

Banned
mcvuk.com said:
July 28th by Ben Parfitt

Increased competition from the likes of Sony and Microsoft has made its mark on under-pressure Nintendo, with the Japanese giant reporting a 78.5 per cent decline in quarterly operating profits.

Consolidated operating profit for the April-June quarter fell to Y3.75 billion from Y17.47 billion the year before, whilst net profit fell to Y14.2 billion from Y22.64 billion. Nintendo blamed the decline in profit on development costs and an increase in hardware sales, which are less profitable than software.

Although the DS handheld sold well, along with key titles such as Nintendogs, the company’s 94 per cent share of the handheld market is under fierce threat from Sony’s new PSP, which arrived in Japan last year and launches in Europe on September 1st.

The GameCube has also underperformed against Sony’s PS2 and Microsoft’s Xbox. The latter intends to launch its new Xbox 360 console this November whilst Sony hopes to roll out its PS3 in spring of next year.

Nintendo has yet to reveal its launch plans for its successor to the GameCube, the Revolution, although sources close to the company suggest a Japanese launch of autumn 2006 is likely.
Click to expand...

Making too much hardware at once? Investing in Rev? Flailing Gamecube business? A good ol' battle with PSP? Still a profitable quarter I guess... annually they tend to well enough in this area to compare with fellow market leaders.

Thought it better to get this posted before someone edits out all context and posts it as a part of any given anti-Nintendo agenda... they can't like all this new pressure. Interesting reading given Revolution's impending unveiling though. It matters all the more.

Oh and... Autumn 06!?
 
nelson.jpg
 
Making too much hardware at once? Investing in Rev? Flailing Gamecube business? A good ol' battle with PSP? Still a profitable quarter I guess...
Click to expand...
That's exactly how I think about it.
 
So basically:

- They make less profit from the DS hardware than from the GBA hardware.
- Their market share for handhelds is closer to 70% now
- What's a Gamecube?
 
Considering the hit Sony has taken getting PSP out, and now PS3, this isn't so bad. Nintendo can't be confident of an assured success like PS3... so staying profitable in development is pretty good. A mid-late 06 launch would bode well for the Rev's capabilities (or the price) but not so well for pretty much everything else. I mean, that can't be right can it? Unless Nintendo know something about the PS3 launch we don't.
 
The handheld pillar was what really made the money for nintendo, development costs have gone up and market share has decreased, although im sure the marketing costs and rev development are taking alot of money at the momment.
 
I think it's most likely the normal fourth quarter to first quarter decrease - you do not make that much profit after the christmas season in this industry.

Nintendo is still expecting an increase in operating profit over this fiscal year.
 
Not that I give too much credence to unnamed sources when it comes to things like this, but an Autumn 2006 launch wouldn't surprise me. It'd surprise me if they're aiming for that though, I imagine it'd only be that late with delays.

Also, no way in hell would they show off this easy to copy controller nearly a year before release if this was their aim and they do ineed intend to show it this year still. Hell, they might as well wait until E3 if it's gonna be that late.
 
thegodsend said:
I think it's most likely the normal fourth quarter to first quarter decrease - you do not make that much profit after the christmas season in this industry.
Click to expand...

For starters, the comparison is to the same quarter last year, not last quarter. Also, Nintendo's fourth quarter is January to March.

They blame it on increased hardware sales which indicates to me that they are selling some hardware at a loss (presumably DS)
 
I wouldn't be surprised if they hade more appealing software during that period last year and the DS might be sold at a loss?
 
From Reuters:

Japan's Nintendo Co. Ltd. (7974.OS: Quote, Profile, Research) reported a 78.5 percent decline in quarterly operating profit on Thursday as a greater proportion of its sales came from low-margin game machines and as development costs rose, but it kept its forecast for a full-year profit increase of 3.1 percent.

Nintendo, known for software titles featuring characters such as Mario, Donkey Kong and Pokemon, is enjoying strong sales of its DS portable game machine, launched late last year, but sold 60 percent fewer GameCube consoles compared with a year earlier.

[...]

Total quarterly sales fell 14 percent to 70.7 billion yen.

Nintendo, which dominates the portable game industry with a roughly 94 percent market share, said it sold 1.38 million DS games in the first quarter.

[...]

Sony on Thursday raised its full year shipment target for the PSP to 13 million units from 12 million units.

Analysts believe Sony's PSP is selling slightly better than the DS in the United States while DS sales are a little stronger in Japan.

[...]

Nintendo said in May it expected its operating profit this business year to rise to 115 billion yen from 111.52 billion yen last year.

Net profit for the first quarter fell to 14.12 billion yen ($125.6 million) from 22.64 billion a year earlier.
Click to expand...
 
SONY
sales and operating revenue 1,559.4 billion yen
operating income -15.3 billion yen
net income -7.3 billion yen

gaming division
sales and operating revenue 172.8 billion yen
operating income -5.9 billion yen


Nintendo
"The first quarter is a period where demand is relatively low."

net sales 70.684 billion yen
operating income 3.754 billion yen
net income 14.115 billion yen

(playing cards and karuta, Japanese playing cards, sales 474 million yen)

http://www.sony.net/SonyInfo/IR/financial/fr/index.html
http://www.nintendo.co.jp/n10/news/050728e.pdf
 
GB Micro will boost profit for this quarter. Also They have the BIG guns on DS still to come.
Jump superstars will boost jap sales, which will take other software sales up with it, as new adopters buy games.

As for the USA. the DS was on the stalemate in Japan until Nintendogs and the like hit, and since then its been all go.
Hopefully USA will do the same
 
Well that Autumn 2006 date for the Japanese launch seems plucked out of thin air :)

Seeing as that last interview said they wanted to unveil the hardware/controller/interface and games all at the same time, and that we know it's going to be unveiled before the end of the year, I'd say that means there's a good chance things are quite far along and the release will follow quite soon after.

Spring/Summer in Japan, Autumn in US, Europe in 2012
 
Sounds to me like they're selling the DS Hardware at a loss.

The GBA must have been a profitable system, but ever since the release of the DS, hardware(and especially software) sales for the GBA have suffered.

See Nintendo? You just should have waited for Sony to play it's hand, and release the GBA2 later down the road.. Unless you really expect the Micro to reinvigorate GBA sales.
 
they can't be losing money on ds hardware. that would suggest monstrous ineptitude, wouldn't it? it's $150! and it's crap! maybe they're spending lots of money on revolution r+d.
 
Well once more of the DS's big games come out like Jump Super Stars, New Mario Bros, and Mario Kart DS. I think that software sales will more than make up for their loss on hardware. I don't think the DS hardware units could be picking more than 10 - 20$ loss per unit.

Edit: Hopefully some of the losses are from Nintendo pumping more money into making some Revolution games, and the actual hardware too. It would be nice to see a few more new games come out from Nintendo for the Consoles. They have seemed to have tons of new IP's for their Handhelds, but not their consoles.
 
drohne said:
they can't be losing money on ds hardware. that would suggest monstrous ineptitude, wouldn't it? it's $150! and it's crap! maybe they're spending lots of money on revolution r+d.
Click to expand...


Of course they could. There's a good amount of tech in there, two screens (one with touch), wi-fi, etc, and not nearly as cheap to produce as the GBA. And it's in the first 12 months of production, which means the overall production process isn't at peak efficiency right now.

And $150 is retail, you have to knock off say $20 to consider packaging, shipment, retailer markup, and so forth.
 
Going to be a very rough comparison for Nintendo in the next three months too. Can't see Jump Superstars selling enough to offset last years release of Pokemon Emerald in Japan. GBA Micro may help revenue but will harm margins. Along with the GBA's higher selling point a year ago and the DSes sluggish sales in North America not making up for the GC and GBAs drop... its not looking good in the short-term for year over year comparisons.
 
hmmmm....sounds like SEGA!
Click to expand...

Genesis(GBA) = profit
Playstation(PSP) = incoming competition!
Saturn(DS) = quickly thrown together machine to hold off said incoming competition. Machine fails to gain any signifigant market share.
Dreamcast(GBA2) = having alienated your entire fanbase, you are unable to attract any potential buyers because you've released too much hardware too fast, confusing all your old fans who simply said, "Fuck it! I'm just gonna get a Sony! At least there's only ONE!"

fig4.gif


GAME OVER
 
nothing to do with profit but the stupid decisions that lead to the downfall. i'm telling you if it werent for pokemon and the GB nintendo would be dead RIGHT NOW.
 
Well, a decrease of 78.5% in profit for ONE FUCKING QUARTER is quite alarming imo.
Imagine what they can loose in a full year. I'm almost wondering if the end this year will be positive. Mind you, there's only Zelda to help the GC and DS games better come out fast.
 
Barnimal said:
nothing to do with profit but the stupid decisions that lead to the downfall. i'm telling you if it werent for pokemon and the GB nintendo would be dead RIGHT NOW.
Click to expand...
No, they wouldn't. Pokemon and Gameboy gave them a crapload of money. Saying that without Pokemon and Gameboy Nintendo would be dead is like saying Nintendo loses money selling their consoles and their software (Mario, Zelda, etc).
 
Keep in mind, it wasn't that long ago that Sega had a net yearly profit of $230 Million.

One bad decision leads to another. Next thing you know, you're in the red and Bill Gates is leaving messages on your answering machine.
 
Ruzbeh said:
No, they wouldn't. Pokemon and Gameboy gave them a crapload of money. Saying that without Pokemon and Gameboy Nintendo would be dead is like saying Nintendo loses money selling their consoles and their software (Mario, Zelda, etc).
Click to expand...

They wouldn't be dead, but they would have little to no profitability. The level of sales that the Gamecube has and the revenue derived from it's games would NOT be enough to cover the operating overhead, production, and development costs that Nintendo incurs.
 
image.gif


Genesis(GBA) = profit OH NOES SELL MORE THAN JESUS!
Playstation(PSP) = incoming competition! OH NOES THEY FAIL!
Saturn(DS) = quickly thrown together machine to hold off said incoming competition. Machine fails to gain any signifigant market share. OH NOES THEY SELL!
Dreamcast(GBA2) = having alienated your entire fanbase, you are unable to attract any potential buyers because you've released too much hardware too fast, confusing all your old fans who simply said, "Fuck it! I'm just gonna get a Sony! At least there's only ONE!" OH NOES NOBODY NOES!

Why do we have a thread turn into this every fucking day when the PSP is nowhere near sales and profits the Nintendo DS? If the PSP continues like this its called a FAILURE! Get real for once.
 
sonycowboy said:
They wouldn't be dead, but they would have little to no profitability. The level of sales that the Gamecube has and the revenue derived from it's games would NOT be enough to cover the operating overhead, production, and development costs that Nintendo incurs.
Click to expand...
Well, they wouldn't be DEAD. And that's my point. Damnit.
 
Lorenzo said:
SONY
sales and operating revenue 1,559.4 billion yen
operating income -15.3 billion yen
net income -7.3 billion yen

gaming division
sales and operating revenue 172.8 billion yen
operating income -5.9 billion yen


Nintendo
"The first quarter is a period where demand is relatively low."

net sales 70.684 billion yen
operating income 3.754 billion yen
net income 14.115 billion yen

(playing cards and karuta, Japanese playing cards, sales 474 million yen)

http://www.sony.net/SonyInfo/IR/financial/fr/index.html
http://www.nintendo.co.jp/n10/news/050728e.pdf
Click to expand...

wow
 
BuzzJive said:
The fact that Nintendo made over $125 million profit this quarter and they are being compared to Sega is MIND BOGGLING.
Click to expand...

They're becoming increasingly irrelevant, finding themselves marginalized as a vendor for Nintendo branded goods -- and not much else. That is where the Sega comparison becomes increasingly APT.
 
Kano said:
They're becoming increasingly irrelevant, finding themselves marginalized as a vendor for Nintendo branded goods -- and not much else. That is where the Sega comparison becomes increasingly APT.
Click to expand...

Except most of the people I know who bought a DC got it for Soul Calibur.

They're really not that comparable. No more so than the Xbox 360 is to the DC, which seems to have calmed down now but we used to see that shitty comparison all the time too.
 
sonycowboy said:
And that listing is wrong :p

Sony has 2 whole games coming out in August:

Namco Museum
Death Jr


Nintendo has 5:

Madden 2006
Advance Wars
Nintendogs
Pac N Roll
Yu-Gi-Oh
Click to expand...

OH SNAP! PSP HAS TWO TITLES! THEY ROCK.....AND ROLL.
 
Kano said:
They're becoming increasingly irrelevant, finding themselves marginalized as a vendor for Nintendo branded goods -- and not much else. That is where the Sega comparison becomes increasingly APT.
Click to expand...


But Sega had a string of unsuccessful and unprofitable consoles before they exited the console business. Nintendo has yet to have 1 (outside Virtual Boy which I don't count).
 
Again, before people pronounce the gloom and doom.

a) This is THE SLOWEST quarter of the year. A decline in this quarter doesn't doom the fiscal year.

b) Nintendo is still projecting a 3% increase in profits for this year vs last (which was $777M) so unless there's any reason to doubt that, they're in just as good a shape as they were last year.
 
radcliff said:
But Sega had a string of unsuccessful and unprofitable consoles before they exited the console business. Nintendo has yet to have 1 (outside Virtual Boy which I don't count).
Click to expand...

I guess it depends on how one defines "successful," as the n64 and its successor, the Gamecube, both cemented Nintendo's flagging presence in this industry. Their base has eroded considerably, all due to the poor third party support and half-assed technology behind the aforementioned efforts. With the Revolutionary, apparently, Nintendo still doesn't get it.
 
sonycowboy said:
Again, before people pronounce the gloom and doom.

a) This is THE SLOWEST quarter of the year. A decline in this quarter doesn't doom the fiscal year.

b) Nintendo is still projecting a 3% increase in profits for this year vs last (which was $777M) so unless there's any reason to doubt that, they're in just as good a shape as they were last year.
Click to expand...
When SONYCOWBOY declares this a bunk issue for Nintendo, you know its nothing to worry about ;)
 
It doesn't matter how much profit your company makes quarterly, or how much your company is worth. If you're satisfied with merely 'getting by' then you're going to become irrelevant in the eyes of potential buyers. Let's say Sony's PSP suddenly takes off and leaves Nintendo's portable in the dust. No big deal, right? Theys still have the REAL successor to the GBA waiting in the wings, right? You release an all new portable 2 years later and you find that everybody's still having fun playing their PSP, which by the way, is now very reasonably priced for the entire family. And suddenly nobody cares anymore outside of a few diehards.

I'm not saying this is going to happen. But is certainly a concern for Nintendo.
 
SonicMegaDrive said:
You release an all new portable 2 years later and you find that everybody's still having fun playing their PSP, which by the way, is now very reasonably priced for the entire family.
Click to expand...

:lol Here is $250 for a "family" device. What are they going to do all huddle around the screen? What if the family member gets nervous and drops the break-prone system? What if that family member gets angry and murders everyone in sight because of this action? Family fun? I think not sir.
 
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