Nintendo Co. halved its annual profit outlook on weak sales of 3DS handheld players and the impact of a stronger yen, highlighting the importance of making the company's smartphone debut next month a success. Net income will be 17 billion yen ($151 million) in the year ending March, the Kyoto-based company said in a statement on Friday. That's 51 percent below its previous target and compares with the 35.2 billion yen average of analyst estimates compiled by Bloomberg. Nintendo cut its 3DS sales outlook 13 percent and kept the forecast for Wii U console sales unchanged. Nintendo plans to release its Miitomo game for mobile devices next month, setting the stage for its biggest shakeup since the 1970s, as it tries to capture players who have shifted to mobile gaming. Nintendo's traditional business of games on its own hardware, anchored by legendary hits like Super Mario Brothers and Donkey Kong, has struggled with sliding sales. The stock has fallen 33 percent in the past six months.
"Lack of hit titles dragged down 3DS sales during the holiday season and looks like the slump extended to January and February," said Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities Co. "Nintendo is at the end of the hardware cycle, so neither 3DS nor Wi U are likely to see much growth." Operating income will be 33 billion yen this fiscal year, down from an earlier projection of 50 billion yen. The currency fluctuation reduced profit by 20 billion yen, Nintendo said. The company cuts its projection for sales 12 percent to 500 billion yen, the lowest revenue level in at least 15 years. "Sales of the 3DS fell short of our targets from January," Nintendo spokesman Yasuhiro Minagawa said. "After adding the impact of stronger yen, we had no choice but to revise."
The forecast cut shows how much is riding on Nintendo's foray into mobile. The shares rose 33 percent last year, fueled by the March announcement that the company planned to develop titles for mobile devices made by other companies. Much of the gains were lost, however, after Nintendo delayed the debut in October. Earlier this month Nintendo started registration for Miitomo, a free-to-play messaging-based application. President Tatsumi Kimishima has said the next smartphone game will feature one of Nintendo's beloved characters, without giving further details. Kimishima has also said the company's work on a successor to the Wii U, code-named NX, remains on track.