Nintendo Sees Profit Slump on Weak GameCube Sales
Demonstrating how fast things can change in the flick-and-twitch world of video games, Nintendo Co. acknowledged Monday that slow sales of its flagship GameCube console have knocked the onetime industry leader to third place behind rivals Sony Corp. and Microsoft Corp.
Global GameCube sales fell 44% short of Nintendo’s 10-million-unit goal for its fiscal 2003, which ended March 31. As a result, the Kyoto, Japan-based game maker -- known for its Pokemon and Mario franchises -- said year-end profit slumped 38% to $550 million from $884 million a year earlier.
Revenue fell 10% to $4.2 billion, buoyed largely by the company’s popular Game Boy portable system.
Nintendo’s U.S.-traded shares fell 4 cents to $10.05 in over-the-counter trading.
“Clearly, the performance of the GameCube did not meet our expectations,” said George Harrison, senior vice president of marketing for Nintendo of America Inc. “Unlike Sony or Microsoft, games are our only business. And we need to make sure we have a big enough business going forward to keep retailers and licensees happy.”
That’s important because the $20-billion global games market has never been able to support three competing consoles long term -- a lesson Nintendo taught former rivals such as Sega Corp., Atari Corp. and 3DO Co.
Until this year, Nintendo enjoyed a comfortable second spot behind Sony’s PlayStation console line, which accounts for about two-thirds of worldwide console sales.
Few worried about Nintendo’s position because the firm traditionally catered to younger game players with family fare. But Sony and its partners have begun infiltrating that market. At the same time, Microsoft markets its Xbox as a cool alternative machine to older teens and young adults, who tend to spend more freely on games.
Microsoft expects to sell 9 million Xbox consoles in its fiscal year ending June 30. Nintendo sold about 5.6 million GameCubes in its fiscal year. Sony has sold more than 50 million PlayStation 2s since the console debuted in late 2000.
“Overall, Sony got a bigger market share than everyone thought they would,” said Michael Pachter, an analyst at Wedbush Morgan Securities, who does not own any Nintendo stock. “Sony took some of the market share that Nintendo thought it would get.”
Nintendo senior managing director Yoshihiro Mori attributed part of the disappointing results to the blockbuster “Grand Theft Auto” series, made exclusively for PlayStation 2. The latest installment, “Grand Theft Auto: Vice City,” was released in the U.S. in October and has sold about 5 million units worldwide.
“GameCube games such as new titles in the ‘Mario’ and ‘Metroid’ series were overshadowed by robust demand for GTA,” Mori said.
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Reuters was used in compiling this report.
