Tue, Jul 26, 2016 - Page 10 News List

Nintendo shares plunge after warning

RALLY OVER:While it stands to make money from a device to be used with ‘Pokemon Go,’ the firm said ‘the income reflected on [its] consolidated business results is limited’


A woman walks past a figure of Mario, a character in Nintendo’s Super Mario games, at a Nintendo Center in Tokyo on July 29 last year.

Photo: Reuters

Nintendo shares plunged yesterday after it warned that the Pokemon Go mania sweeping the world would not translate into bumper profits, popping a dizzying rally that more than doubled the Japanese firm’s market value.

The shares dived 17.7 percent to close at ¥23,220 in response to a warning after markets closed on Friday last week that the hugely popular smartphone game would have only a “limited” impact on the Japanese company’s bottom line.

Markets had cheered the app’s global success as a great sign for Nintendo’s long-awaited move into the mobile games market.

The shares soared as investors bought the narrative, pushing them above ¥30,000 at one stage — doubling Nintendo’s market capitalization and making it more valuable than Sony Corp — but analysts warned that the rally was overdone since the actual impact of the game on Nintendo’s finances would be moderate at best; a point it confirmed on Friday.

Nintendo is the creator of the Pokemon franchise, but the game, released on July 5, was developed and distributed by US-based Niantic Inc, a spinoff of Google.

Nintendo has invested in Niantic and owns about a third of Pokemon Co, which will get licensing fees for loaning out the cuddly monsters’ brand.

Downloading the app is also free, so Nintendo and others are banking on users gravitating to paid-for services in the game itself.

While it stands to make money from a device to be used with the application called “Pokemon Go Plus,” Nintendo said “the income reflected on [its] consolidated business results is limited.”

“The company is not modifying the consolidated financial forecast for now,” its statement said.

Since its launch, Pokemon Go has sparked a worldwide frenzy among users, who have taken to the streets with their smartphones.

The app uses satellite locations, graphics and camera capabilities to overlay cartoon monsters on real-world settings, challenging players to capture and train them for battles.

Pokemon Go was seen as a shot in the arm to Nintendo — which also created Donkey Kong, Super Mario and Legend of Zelda — after it abandoned a longstanding consoles-only policy and opened the door to licensing some of its characters for mobile game use.

“I think Nintendo issued that statement because it was uneasy with how high the shares were rising,” Ace Research Institute analyst Hideki Yasuda said. “There has been a view that Nintendo cannot succeed in the smartphone business. Even if Pokemon Go does not directly contribute to Nintendo’s earnings, it owns other characters like Super Mario and Zelda. These things were factored in and boosted its shares.”

Yasuda added the firm’s shares might rally again after an “adjustment period.”

The smartphone app has now been launched in more than 40 nations, but until last week Japan — where Nintendo started the mythical creature franchise 20 years ago — was kept waiting.

Pokemon, short for “pocket monsters,” has been a constant in Japan since being launched as software in 1996 for Nintendo’s Game Boy console. Authorities in a number of nations have expressed safety and other concerns about the craze.

Players from San Francisco to Lagos have been warned after trespassing, including some youngsters crossing the Canada-US border.

Some walked into sensitive military facilities and a nuclear power plant, while other players found themselves the victims of robbery or violent crimes.

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