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Nintendo soaring higher despite global downturn
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Nintendo soaring higher despite global downturn
By TOMOKO A. HOSAKA,Associated Press Writer AP - Wednesday, January 28
TOKYO - Japanese video game and console maker Nintendo Co. reports third quarter earnings on Thursday. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: Nintendo is on a roll, and neither its rivals nor the deteriorating global economy have been able to slow it down. Demand is as strong as ever, with its two hit products _ the Wii gaming console and the DS portable handheld device _ smashing holiday and annual sales records in the U.S., its biggest overseas market. Sales would likely have been even better had the company not struggled with supply shortages.
The Kyoto, Japan-based company sold 2.14 million Wii consoles in the U.S. in December, pushing its 2008 total to an industry record of 10.17 million units sold in a single year, according to research group NPD Group Inc. Americans bought 3.04 million DS units in December, up 17 percent from the previous year and a single-month record for Nintendo. The top four best-selling console games in 2008 were "Wii Play," "Mario Kart Wii," "Wii Fit," and "Super Smash Bros. Brawl" _ all Nintendo products.
Worldwide, the company expects to sell 27.5 million Wii units in the fiscal year through March.
BY THE NUMBERS: Nintendo is forecasting a record net profit of 345 billion yen ($3.9 billion) in the fiscal year ending March 2009, up 34 percent from the previous year. Sales are expected to grow 20 percent to 2 trillion yen ($22.5 billion).
Analysts surveyed by Thomson Reuters, on average, expect fiscal year profit of 309.5 billion yen ($3.5 billion). For the October-December quarter, analysts predict net profit of 96 billion yen ($1.1 billion).
ANALYST TAKE: Goldman Sachs is bullish on Nintendo and says the company is "rich in strategic options" to continue profit growth in the next fiscal year through March 2010. Although Nintendo cited an appreciating yen as a major concern in its second-quarter earnings report, analysts Yuji Fujimori and Haruka Mori say it should be able to offset the impact of foreign exchange, as well as an expected slowdown in DS sales, with higher sales of the Wii, related software and new low-cost models.
"The DS cycle may be on the wane but we believe it is only beginning to reap rewards on high-priced Wii software," they said in a report Monday.
WHAT'S AHEAD: Despite its continued success in targeting nontraditional gamers, Nintendo faces potential risks in the coming months. While the gaming industry has traditionally been relatively insulated from economic swings, the current global downturn may begin hurting the sector if conditions deteriorate even further or if the yen keeps strengthening. Nearly 90 percent of Nintendo's profits are made outside Japan, so currency fluctuations play a big role in the company's fortunes. The company's performance may also hinge on the popularity of software titles and any moves by rivals to lower hardware prices.
STOCK PERFORMANCE: Nintendo shares lost about half their value in 2008 amid steep declines in Tokyo equity markets. During trading Tuesday, the issue closed up 5.4 percent at 30,050 yen, compared with 46,800 yen on Jan. 28, 2008.
Goldman Sachs maintained its "Buy" rating on Nintendo stock this week but reduced its target price to 40,000 yen from 42,000 yen. The brokerage says it expects the stock to rise on "solid" earnings this fiscal year and next.
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