Nintendo Reaps Gains From 'Pokémon Go' -- WSJ
October 27 2016 - 3:03AM
Dow Jones News
By Takashi Mochizuki
OSAKA, Japan -- The global craze over the "Pokémon Go"
smartphone game brought a net-profit windfall to Nintendo Co. in
the latest quarter, but its lagging hardware business was an
operating-earnings drag.
Nintendo recorded an operating loss of Yen812 million ($7.8
million) in the July-September quarter, as its flagship Wii U
videogame console proved unpopular. It hopes to revive sales with
its Switch console and hand-held device, set to go on sale next
March.
For the April-September period, Nintendo booked a Yen12 billion
($111.1 million) profit from its affiliates -- mostly from
Pokémon-related businesses, according to Chief Executive Tatsumi
Kimishima.
In "Pokémon Go," which launched in July, players hunt for cute
virtual monsters superimposed on their smartphone camera's images
of real-life streets and buildings. They can make in-game purchases
to help them play. Nintendo doesn't get the money directly, but it
is a 32% owner of Pokémon Co., which produced the game along with
Alphabet Inc. spinoff Niantic Inc.
Analysts said the Pokémon-related profit was a surprise. "This
is shocking because I had my expectations much lower," said Hideki
Yasuda, an analyst at Ace Research Institute.
Mr. Yasuda said the Nintendo portion suggested the "Pokémon Go"
app as a whole earned more than Yen60 billion during the quarter. A
Pokémon Co. spokeswoman declined to comment on the game's financial
performance.
For Nintendo, the Pokémon impact went beyond the smartphone
game, the company's Mr. Kimishima said: Many consumers picked up
Nintendo's aging hand-held 3DS device to play older Pokémon games,
and preorders were strong for new 3DS Pokémon games coming in
November. Nintendo said it expected to sell six million 3DS units
in the year ending March 2017, up from an earlier forecast of five
million.
Nintendo also directly sells a $35 wearable device for "Pokémon
Go" players.
Mr. Kimishima declined to give sales numbers but said demand is
"much higher" than anticipated.
The favorable numbers from "Pokémon Go" suggest that Nintendo's
own smartphone games are likely to contribute to the bottom line.
Nintendo plans in December to release a game featuring Mario the
plumber, the company's most famous franchise, for Apple Inc. smart
devices.
Smartphone games are now the biggest segment of the industry,
and analysts say Nintendo's family-friendly characters are
well-suited to the medium. Some say Nintendo should get out of the
hardware business and focus on smartphone software.
Nintendo disagrees and plans to roll out the Switch device to
replace the Wii U, which has had disappointing sales. Nintendo
released a first-look video about the Switch last week, and Mr.
Kimishima declined to provide further details.
In the July-September period, the Kyoto-based company reported a
net profit of Yen62.8 billion ($603 million), largely because of
its sale of its controlling interest in the Seattle Mariners
baseball team, which brought in Yen62.7 billion.
Nintendo raised its net-profit forecast for the year ending in
March to Yen50 billion from Yen35 billion thanks to the Mariners
sale, but said operating profit would come in at Yen30 billion,
down from the previous forecast of Yen45 billion.
Write to Takashi Mochizuki at takashi.mochizuki@wsj.com
(END) Dow Jones Newswires
October 27, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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