Nintendo misses chance at Pokemon profits with delay in product launch

Firm pushed back launch of a gadget that helps users detect nearby virtual monsters

FOR Nintendo, it’s becoming one Pokemon No after another. After telling investors last week that they won’t be able to rely on Pokemon Go to bolster profits, the company said on Wednesday that a widely anticipated accessory for the hit app will be delayed until September.

Pokemon Go Plus, a 3,500 yen ($33) Bluetooth gadget that helps users detect nearby virtual pocket monsters, was supposed to be Nintendo’s one measurable benefit from the explosive popularity of the game. It was set to go on sale in Japan this week, until Nintendo, Pokemon Co. and developer Niantic pushed back the accessory’s debut.

Not only did that send Nintendo shares down as much as 13% in German trade, it will probably force analysts to adjust their estimates, which were already in disarray because of the lack of clarity over how Pokemon Go will impact the company’s bottom line. Still, Nintendo maintained its outlook for 35 billion yen in profit for the current fiscal year when it reported earnings shortly after announcing the delay.

“The delay is disappointing, especially since it’s just a Bluetooth accessory that has already been available for pre-order,” said Atul Goyal, an analyst at Jefferies Group. “The sales will still accrue to Nintendo with a delay. Just as all eyes turn to Nintendo, the company’s management can’t seem to get their communication right.”

Mitsubishi UFJ Morgan Stanley Securities estimated that Pokemon Go Plus would add 45 billion yen in sales and 8.2 billion yen in income to Nintendo for the current fiscal year, based on its original sale date. Analysts at Bank of America were predicting an extra 10.5 billion yen in profit.

“Is Nintendo really not even capable of producing a low-end accessory these days?,” said Serkan Toto, founderof consultantKantan Games. “It has now delayed the launch to a time when at least the initial hype around the game will definitely be over. In contrast to Pokemon Go earnings, Nintendo would have pocketed most of the margin for the device.”

While the Pokemon Go Plus delay was announced in Japan and the US, it wasn’t clear what the impact would be in other places where the game has debuted.

What could weigh even further on Nintendo is the net loss of 24.5 billion yen it reported for the first quarter, which ended in June and was wider than analyst projections for a loss of 3.4 billion yen. Profitability was dragged down by sluggish demand for Wii U consoles and a stronger yen, and uncertainty over how much the Kyoto-based company will benefit from Pokemon Go.

The current fiscal year marks the biggest test yet of Nintendo’s ambitions to reinvent itself in mobile games. After resisting smartphones for years, it plans to release five titles through March 2017, including two by the end of this year. Its first release, messaging app Miitomo, has received a tepid response from users.

Unlike the upcoming titles, Pokemon Go was developed by San Francisco-based Niantic and Pokemon, which is 32% owned by Nintendo. While excitement over the game’s popularity at one point more than doubled Nintendo’s market value, shares have since corrected as the company pared back expectations, saying financial impact will be “limited.”

Roughly 13% of Pokemon Go sales should flow to Nintendo, according to an estimate by David Gibson, an analyst at Macquarie Securities in Tokyo. Details of the game’s financial contribution should become clearer with its results for the September quarter, which covers the period since Pokemon Go’s release.

Bloomberg

Pokemon Go players meet in Lodhi Garden in New Delhi