Nintendo Raises Revenue Forecast Yet Again

Nintendo has a problem that more companies would like to have. It keeps having to raise its revenue forecast because its products are flying off the shelves. Normally, when the analysts’ consensus needs correcting, it is because they didn’t do a very good job of modeling performance. In this case, though, no one anticipated the incredible results for the year because things that don’t normally happen actually did.

A poll of 17 analysts by Reuters Estimates predicted revenue for the year ended March 31 at ¥929 billion (US$7.8 billion). The company said sales totaled about ¥966 billion (US$8.1 billion) for the year ended March 31, up from its previous forecast of ¥900 billion (US$7.5 billion). Revenues are now expected to be up 90% over last year.

While Nintendo didn’t offer profit projections, it did say that existing estimates were probably too low. In January, Nintendo put out its third earnings revision for the year anticipating an operating profit of ¥185 billion and net profit of ¥120 billion, both of which would already be record numbers – and now they’re too low.

Well, why was everybody wrong? Nintendo spokesman Yasuhiro Minagawa offered an explanation, “Merchandise does not move in the January-March quarter - that is the norm in this industry. But ours somehow did.” Perhaps the fact that the Nintendo DS (a handheld unit) and the Nintendo Wii (a console) are the hottest products in their space had something to do with it. The DS sold 23 million units in the year ended March 31, 2007, which is about double what rival Sony’s PSP sold. In fact, Sony has cut the price of the PSP in the US by 15% to better compete. The same sales results held for the Wii versus Sony’s PlayStation 3 – about double.

Nintendo plans to report its actual figures on April 26. At that time, it will also announce a dividend based on its foreign exchange rate profits. One trusts the Company and its shareholders enjoy their success because there is one certainty in the gaming business: Glory is fleeting.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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