Last Tuesday Nintendo announced its earnings for fiscal year 2007 (Videostream of the Financial Results Briefing), which ended on March 31st. As previous revised bullish projections indicated might be the case, Nintendo’s consolidated revenue rose to all time high of 966.634 billion yen, up from 509.249 billion yen last year. Operational income and net income rose from 90.349 and 98.378 billion Yen to 226.024 and 174.290 billion yen, respectively, during the past year, thus signifying an increase by over 150% and 77%.
Nintendo’s forecast for FY 2008 remains good: Revenue is expected to grow to 1,140 billion yen. Additionally, operating income is expected to rise by 26.7% to 290.000 billion yen, while net income remains relatively stagnant (175.000 billion yen), mainly due to foreign exchange losses of 20 billion yen, compared to gains of 23.131 billion yen in FY 2007.
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All in all, Nintendo’s projected targets seem very ambitious. While analysts see further “unhindered” growth and a realistic long term stock value of over 44,000 yen per share (currently: 37,800 yen), it remains to be seen if indeed 14 million Wiis can be sold in FY 2008, especially since a significant price drop of the competing consoles from Microsoft and Sony is expected later this year, thus decreasing Nintendo’s price advantage. Moreover, the lower tie-ratio in Japan points to a lack of diversity in the line-up. However, an increased marketing budget could widen Nintendo’s target audience and thus compensate for some of these aforementioned effects. The Nintendo DS has also reached a critical stage: As life-to-date sales in Japan have reached GBA levels, market saturation could take place. Nevertheless, if the DS truly achieves mainstream penetration, its sales could reach PS2 levels (Japan: 24.76 million units sold) during the current fiscal year. Interestingly, Nintendo’s R&D budget is also rising from 37.725 billion yen in FY 2007 (30.596 billion yen in FY 2006) to 45 billion Yen this fiscal year. This could indicate that a successor for the DS is getting prepared for a release in FY 2009.