Japanese gaming company Nintendo reported a 10% decline in quarterly profit on Tuesday, far wide of market expectations, as a rise in costs dulled stronger sales of its hybrid home-portable Switch console.
Operating profit for the three months through June was
¥27.4bn ($252.26m), compared to the ¥40bn average of 10 analyst estimates compiled by Refinitiv.
The Kyoto-based gaming company said it sold 2.1-million Switch consoles in the quarter, bringing the total installed base to 36.9-million units. It maintained its full-year sales forecast of 18-million units for the year ending March.
Looking to offset declining sales of its aging 3DS hand-held console and expand beyond its core fanbase, Nintendo will, in September, launch the Switch Lite device, which cuts unit costs by dropping the Switch’s TV dock and detachable controllers.
The Switch Lite will retail in the US at $199.99, compared with the Switch’s price of $299.99. Nintendo did not provide a sales forecast for the new device.
The launch comes as the famously secretive company shows signs of greater openness, tying up with mobile game developers for smartphone-based titles such as Mario Kart Tour, which is due to be released this summer in partnership with DeNA.
While some analysts said this could prove a breakthrough hit, early download numbers for Nintendo’s most recent mobile title Dr Mario World, developed with Line Corporation, have trailed earlier releases such as Mario Run, data from Sensor Tower showed.
Nintendo’s expansion plans also include a partnership with China’s largest games maker, Tencent Holdings, of which Naspers owns just more than 30%, that aims to sell the Switch in China’s stunted console market. The two firms are set to exhibit at Shanghai’s ChinaJoy gaming expo in early August.
Last week, Tencent said it will work with Nintendo-backed The Pokemon Company on a new game, in a partnership that could capitalise on the popularity of Japanese characters in China.
For the Switch, analysts are looking to the release of the device’s first full Pokemon games — Pokemon Sword and Pokemon Shield— in November to further push sales.
Nintendo’s diversification drive comes as the global gaming market faces a shake-up as entrants such as Google parent Alphabet and Apple move into game streaming services.
Many analysts nevertheless said games fans will continue to hew to traditional console manufacturers such as Nintendo and Sony with their exclusive games featuring well-established characters.
Nintendo’s shares closed up 0.7% ahead of the earnings announcement. Its share price has risen 39% year-to-date.
- Reuters
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