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Fri, May 26, 2006 - Page 10 News List

Nintendo says profit to fall

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Nintendo Co, the world’s biggest maker of handheld video-game players, said profit will fall 34 percent this fiscal year because of the US dollar’s decline against the yen. The stock slid the most in three and a half years.

Net income will drop to 65 billion yen (US$576 million) in the year ending March 31 from 98.4 billion yen in the year just ended, the Kyoto-based company said in a statement yesterday. Sales will rise 18 percent to 600 billion yen from 509.2 billion yen.

Nintendo said it won’t repeat gains made last year on selling investments and revaluing its more than US$2.9 billion in foreign currency assets. The weaker dollar will also erode sales of new versions of the DS portable game player and the Wii home console, which will be released in November at a cheaper price than rival products from Sony Corp and Microsoft Corp.

“There is always a bit of a psychological issue with the foreign exchange gains or losses," said Hiroshi Kamide, an analyst at KBC Securities in Tokyo who has a “buy" rating on the company. “I wouldn’t say their business model is getting weaker or their positioning in the market is getting worse. I think things are going to get better."

Operating profit, or sales minus the cost of goods sold and administrative expenses, will rise 22 percent to 110 billion yen from 90.03 billion yen last fiscal year.

Nintendo forecasts the yen to trade at an average 110 against the dollar, and at 140 versus the euro this fiscal year.

The company expects to lose about 27 billion yen from foreign exchange fluctuations this year, after booking a 45.5 billion yen profit last year when it calculated earnings based on 117.47 yen to dollar and 142.81 yen to the euro.

The company, which created the Super Mario character, is counting on the Wii’s lower price and a motion-sensitive remote controller to attract gamers from choosing Sony’s PlayStation 3 and Microsoft’s Xbox 360.

The Wii won’t cost more than 25,000 yen, said Yoshihiro Mori, Nintendo’s senior managing director, at a news conference in Osaka. The company expects to ship 6 million Wii consoles this fiscal year, and about 17 million software games for the device.

Sony will charge US$499 in the US for a 20-gigabyte PS3 model and US$599 for a PS3 with 60 gigabytes of storage when it’s released in November. The Xbox 360, released in November last year, sells for as much as US$399.

Nintendo’s research and development costs will rise to 32 billion yen from 30 billion yen last year. Costs gained 50 percent in the previous year, the company said. Capital spending, which includes investment in production facilities for the Wii console, will rise 25 percent to 7 billion yen, the company said.

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