Nintendo Co Ltd said on Thursday its first-half operating profit plunged 51 percent, hurt by sluggish GameCube sales in the United States, and it kept its forecast for a full year profit decline.
Nintendo, known for games featuring characters such as Mario, Donkey Kong and Pokemon, expects to report a 3 percent decline in revenue for the full year to next March as GameCube console and software sales taper off and it is hurt by a price cut for its DS portable game machine, which it launched about a year ago.
The October-March second half could get tougher as Microsoft Corp takes the spotlight in the game industry with its new Xbox 360, the first of the next-generation game consoles.
Xbox, which launched in the United States on Tuesday, sold out at most stores in the first day. Nintendo will be the last company to roll out its newest game console, code-named "Revolution", following Sony Corp, which plans to release its Playstation 3 next spring.
Nintendo said it believed GameCube's life was nearing an end while margins have been hurt by record-breaking development costs for Revolution as well as DS games.
The company cut its full-year sales targets in terms of units for DS to 12 million and for GameCube to 2.4 million, although it raised its forecast slightly for Game Boy Advance to 11 million, helped by the launch of Game Boy Micro in September.
"Sales of our most profitable machine, GameCube, have fallen while sales of DS, which has a low margin, are replacing sales of the higher-margin Game Boy Advance SP," said Yoshihiro Mori, senior managing director at Nintendo.
Mori declined to comment on the launch timing for the Revolution console but said it would be in time for the 2006 holiday season at the latest.
Consolidated operating profit for the April-September first half came to 19.6 billion yen ($165 million), compared with 40 billion yen in the same period last year and slightly lower than its forecast of 20 billion yen, which it gave last month.
Nintendo said it still expects an operating profit of 90 billion yen for the full year versus 111.52 billion yen last year. That compares with market expectations of 102 billion yen according to a poll of 17 analysts by Reuters.
First-half sales fell 6.2 percent to 176.4 billion yen from 188 billion yen a year earlier and compared with its own forecast of 175 billion yen.
"Nintendo is focusing its energy on DS, but it has not done that well with it so far in the United States, in part because of a delay in some game launches," said Takeshi Tajima, an analyst with BNP Paribas.
"The company has also been criticised for ignoring the kids' market, focusing instead on capturing women and older adults," he added, saying he will be watching closely for Nintendo's plans to rectify the situation.
One obvious way would be to roll out a new Pokemon game for DS, Tajima said.
Nintendo's net profit fell to 36.63 billion yen from 46.45 billion yen a year earlier, in line with the company's forecast of 36 billion yen. The figure was higher than Nintendo's initial expectation due to favourable foreign exchange rates.
The company said it expected a net profit of 75 billion yen for the full year, matching market expectations according to Reuters Estimates. It posted a profit of 87.4 billion yen last business year.
Shares of Nintendo rose 13.2 percent in the first six months of its business year, underperforming the Nikkei average, which rose 16.3 percent.