Nintendo sticks to its console guns despite Wii U flop

Nintendo believes the future is bright for video game consoles

Nintendo won't be abandoning hardware or licensing its game titles for use on smartphones, its President Satoru Iwata told analysts in Tokyo.

Although he bowed in apology for the company's lackluster performance and has reportedly accepted a 50 percent pay cut, Iwata said Nintendo will not abandon the hardware business, but will try to reach out to gamers through marketing on smart devices, make the most out of the struggling Wii U console, and license game characters to new partners.

Popular games like the Mario franchise will not be released on smart devices, Iwata said, adding that releasing games as they are wouldn't be the best entertainment experience for smart devices.

He qualified that remark, however, by saying he had not put any restrictions on the company's mobile content development team, and has not ruled out making games or using Nintendo's game characters.

The company's dedication to hardware and software synergies remains firm as its core business, he said.

"Since the revision to our full-year financial forecast, there have been various reports and comments about us," Iwata said in a statement, referring to the company's drab results and ensuing calls for the game giant to release titles to outside platforms. "However, we do not hold a pessimistic view of the future of dedicated video game platforms."

"Given that the competition for consumers' time and attention has become fierce, I feel that how we will take advantage of smart devices is an extremely important question to answer. However, in order to be absolutely clear, let me emphasize that this does not mean simply supplying Nintendo games on smart devices," Iwata said.

The company will take advantage of smart devices by connecting to consumers, including those who do not own Nintendo's video game systems, through smart devices to communicate the value of its entertainment offerings, and encouraging more people to participate in Nintendo platforms, he added.

Investors had few immediate cheers for his speech. Nintendo stock was down 3.5 percent in morning trading on the Tokyo Stock Exchange.

Iwata also hinted that Nintendo will pursue "non-wearable" health-monitoring technology. He offered no details other than saying the tech isn't something people would necessarily use in their living room, and that more information will be released later this year.

The company will release Mario Kart 8 globally in May for the Wii U, Iwata said, adding that worldwide sales of the NIntendo 3DS have reached 42.74 million units.

"I didn't hear anything that is going to turn Wii U around near-term," said Lewis Ward, research manager for gaming at IDC. "I think another US$50 price cut for the Wii U bundle is needed but that wasn't announced today and it may not happen at all this year."

The Wii U needs to embrace user-generated content such as the ability to play Super Mario levels cooperatively online, Ward said. "I'm sure some big news will be broken at this year's E3 event in June, but little announced on the call today seems likely to give the Wii U a big lift near-term, and this is really the part of Nintendo's business that needs a lift," he added.

Founded in 1889 to market traditional Japanese playing cards, Nintendo has been reeling amid the recent popularity of smartphones as gamers move from consoles to phone handsets.

The briefing came the day after Nintendo reported disappointing results for the October-December quarter of last year, with operating profit down 6.9 percent from a year earlier to ¥21.7 billion ($211 million). Revenue was ¥302.6 billion, down 11.5 percent from ¥342 billion.

On Jan. 17, Nintendo warned of a net loss of ¥25 billion for the year to the end of March, instead of the ¥55 billion net profit it had forecast last April.

It had posted a ¥7.1 billion net profit for the year ended March 31, 2013, but this month blamed the poor performance on sluggish sales of high-margin games during the year-end period. Disappointing hardware sales were behind that, it suggested.

The game giant slashed estimates of sales of the Wii U, launched in 2012, from 9 million units to 2.8 million for the year to the end of March 2014, and revised downward its sales projections for the 3DS console from 18 million units to 13.5 million for the same period.

It sold 2.4 million Wii U consoles in the nine months from April to December 2013, down from 3 million units a year earlier.

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Tags business issuesfinancial resultsNintendogameswiiGame platforms

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Tim Hornyak

IDG News Service
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