Nintendo Reports Earnings Loss

[AzBat]

First earnings loss in 7 years? Wow. Think we'll get more details on Wii2 pretty soon? They can't just rely on 3DS for new sales next year can they?

http://www.nintendo.co.jp/ir/pdf/2010/101028e.pdf

http://www.gamasutra.com/view/news/...s_In_Face_Of_Rising_Yen_And_Falling_Sales.php
http://www.joystiq.com/2010/10/28/nintendo-painted-red-in-first-half-fiscal-year-results/
http://kotaku.com/5675332/nintendo-ds-sales-fall-through-the-floor

Tommy McClain

 

[upnorthsox]

Indeed, hard to see them going to $149 if they're losing money at $199 and imho there is no support until $149 and that may not last longer than it did at $199. WiiHD is going to shorten this gen by a yr and if it comes a yr sooner than expected....well I don't see the other 2 holding out til 2013.

 

[DuckThor Evil]

I don't understand how these companies can make such huge losses due to currency fluctuation, when there are basic instruments to negate the fluctuation effects


http://archives.tcm.ie/businesspost/2006/11/19/story18848.asp

All businesses involved in international trade, both importers and exporters, have a responsibility to protect themselves from the potentially negative impacts of currency fluctuation.

Hedging your currency risk is something that most people, whether they are importing or exporting, should be doing as a matter of course.”

The two main options available to help businesses manage these risks are forward contracts and currency options.

 

[tongue_of_colicab]

Indeed, hard to see them going to $149 if they're losing money at $199 and imho there is no support until $149 and that may not last longer than it did at $199. WiiHD is going to shorten this gen by a yr and if it comes a yr sooner than expected....well I don't see the other 2 holding out til 2013.

Losing money on the wii at 149 dollars? Doubt that. If they could sell a GC at 99 dollars 6 years ago and still make money surely they can make a wii for that money or less by now. Anyway the Wii's biggest problem is the lack of software (sales). Hardware still sells better than x360 or ps3 do.

The high yen is probably hurting them far more than the drop in sales.

 

[DuckThor Evil]

The high yen is probably hurting them far more than the drop in sales.

Actually the effect was almost the same. The numbers are in their financial statement. Foreign exchance losses cost them little over 60 billion yen and their gross profit from sales dropped little under 60 billion yen.

 

[MfA]

Dollar inflation is not a fluctuation ... or if it is, they are still going to be fucked (if the US starts deflating they're not going to be selling a lot of product there).

 

[zed]

Yes the high yen is not good news for sony as well as all the japanese exporting companies.
btw ninetndo had a loss last quarter as well IIRC

 

[upnorthsox]

Losing money on the wii at 149 dollars? Doubt that. If they could sell a GC at 99 dollars 6 years ago and still make money surely they can make a wii for that money or less by now. Anyway the Wii's biggest problem is the lack of software (sales). Hardware still sells better than x360 or ps3 do.

The high yen is probably hurting them far more than the drop in sales.

Well the financial report says differently, which is my point.

Btw, I wouldn't have suspected it either, and even if they're not actually losing money per unit on the Wii the question is can they afford 500-750 mil in lost revenue from a price drop at this point.

 

[AlphaWolf]

Hardware still sells better than x360 or ps3 do.

Not the last few months it hasn't been.

 

[Mize]

I don't understand how these companies can make such huge losses due to currency fluctuation, when there are basic instruments to negate the fluctuation effects


http://archives.tcm.ie/businesspost/2006/11/19/story18848.asp

I think you misunderstand.
Nintendo isn't an importer or exporter. It is a multinational manufacturer that sells consumer goods.
Hedging allows your price to remain constant in your currency. In this situation the price of a Wii would vary from day to day for distributors in the US. Do you really think a consumer market would tolerate day to day or week-to-week price fluctuations? In electronics is unheard of to INCREASE sell price after launch, but that's what Nintendo would have had to do.

In this situation the only way to play safe with currency fluctuations is to have enough margin to absorb large swings and enough case to push the pipeline when the exchange rate is favorable.

 

[corduroygt]

I don't understand how these companies can make such huge losses due to currency fluctuation, when there are basic instruments to negate the fluctuation effects


http://archives.tcm.ie/businesspost/2006/11/19/story18848.asp

Those contracts are for a few months ahead at most, they're not going to protect you from long term dollar inflation:
http://www.google.com/finance?chdnp...019791&chddm=1745584&q=CURRENCY:USDJPY&ntsp=0

 

[Mize]

uh...dollar deflation.

 

[Rangers]

Yes the high yen is not good news for sony as well as all the japanese exporting companies.
btw ninetndo had a loss last quarter as well IIRC

No, they profited this quarter. Last quarter was a loss. For some reason Nintendo reports results year to date. They reported a small loss for the last six months. But the last three months they are profitable.

So all the headlines report a Nintendo loss, when really they had a profit (about 285 million $ by my figuring) in the July-Sep Q, it was just wiped out by a slightly larger loss in the Apr-Jun Q.

This financial stuff is ridiculously confusing in lots of ways, they should straighten that out.

As for this currency stuff, what I hear from economists I respect like Peter Schiff, a lot more dollar inflation is coming for a long time, as the only way out of Americas ever increasing socialism spending=high debt is inflating it away. So I guess the Japanese companies shouldn't expect any reprieve, if anything could get worse. While some European countries have faced a sort of day of reckoning (austerity measures protests), America is continuing headlong into a path of fiscal destruction.

 

[patsu]

While we are at it...

http://www.andriasang.com/e/blog/2010/10/29/wii_direct_sales/

Nintendo announced today a new direct sales service called "Wii no Ma Shopping." This service will kick off on November 1 as part of the system's Wii no Ma video channel.

...

At its start, the service will have product from three suppliers: Senshukai, Senshukai Iihana and Shachata. Isetan Mitsukoshi and other retail giants are also scheduled to support the service, Nintendo said.

In a press release outlining the service today, Nintendo listed the following as selling points:

* Ease of use through the Wiimote

* Customers can enjoy shopping 24 hours through their television.

* The service will offer over 10,000 items, from including food, fashion and furniture.

* The service will offer exclusive items that will not be sold elsewhere.

* Buyers will be able to make payments via credit card, cash on delivery and payment at nearby convenience stores.

* The service will also allow orders to be placed via the phone.

Wii currently has 10.7 million systems in Japan, according to the press release. Of these 40% connect to the internet. 85% of owners have the system connected to their living room television.

 

[DuckThor Evil]

I think you misunderstand.
Nintendo isn't an importer or exporter. It is a multinational manufacturer that sells consumer goods.
Hedging allows your price to remain constant in your currency. In this situation the price of a Wii would vary from day to day for distributors in the US. Do you really think a consumer market would tolerate day to day or week-to-week price fluctuations? In electronics is unheard of to INCREASE sell price after launch, but that's what Nintendo would have had to do.

In this situation the only way to play safe with currency fluctuations is to have enough margin to absorb large swings and enough case to push the pipeline when the exchange rate is favorable.

I'm talking about making for example a forward contract with a bank to have a fixed exchange rate from dollar to yen, not with the purchaser of the product. The purchaser will pay in dollars and Nintendo will get yens from the bank according to their contract.

Those contracts are for a few months ahead at most.

I've understood that the contracts can be far longer, over a year easily, but I'm no expert on this.

 

[Mize]

Nintendo would have to have a credit line equal to the currency forward contract total and pay interest on it.

 

[Arwin]

Surely they've payed a big part of the 3DS development costs in that period? For instance all those proto-types that people got to play with at E3 would have cost something - they didn't roll off a factory line I reckon? And a lot of last minute R&D would have taken place, and perhaps support / encouragement for developing showcases etc. They had a lot they wanted to (and did) show at E3 and it probably has cost something. They may also have saved up some of the previous development costs to that quarter to hide the fact that it was coming.