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Business

Weak high-margin sales behind lower Nintendo forecast

Despite strong net profit, gaming giant revises down operating profit estimate

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An event employee of Nintendo attends the presentation ceremony of its new game console Switch in Tokyo on Jan.13.   © Reuters

OSAKA -- Nintendo on Tuesday announced a revised earnings forecast for the year through March 2017.

The company raised its group net profit forecast to 90 billion yen ($795 million) from the previous 50 billion yen, thanks mainly to an adjusted foreign exchange rate. This will mark an increase of 5.5 times the figure from the previous year.

The forecast for group operating profit, however, was reduced by 10 billion to 20 billion yen, largely due to weak sales of the high-margin products of its signature gaming console business. Operating profit will be down 39% on the previous year.

"We did well overall for the holiday shopping season in December, but sales of high-margin products were rather weak," said company President Tatsumi Kimishima during a media briefing.

Q: Why did you revise down operating profit?

A: Nintendo 3DS, our latest portable console, was selling well. New video game titles -- "Pokemon Sun" and "Pokemon Moon" -- also drew customers and sold well. But, particularly for the holiday shopping season in December, sales of high-margin products -- character figurines and other game-related products -- were weak. In addition, we had relatively fewer offerings of downloadable game titles than the year before.

Q: The "Super Mario Run"smartphoneapp was released in mid-December. How is it going?

A: The app has been downloaded some 78 million times. But the amount of in-app billing has so far failed to meet our expectation. The percentage of users shifting to the paid version of the game -- within 10 days from downloading the free app -- has been between 5% and just under 10%. It's lower than our plan, so we will have to improve the game, including an updated version of the app, for example.

Q: The Switch, your latest game system, is schedule to roll out in March. Are you receiving many pre-orders?

A: I can't say the exact number of pre-orders, but we have sensed big expectations from customers. Pre-orders allocated for delivery on the release date have been mostly sold out at each store. We will be able to deliver 2 million units in March. We might consider increasing the number of shipments depending on customers' needs, but we don't know how much we will add yet.

Q: Will the Switch be profitable? Some have pointed out a lack of titles.

A: I have answered a similar question before, but we will not sell the Switch at a loss-making price. As for the availability of game titles, having a good lineup of titles available at the launch is essential. But we also think it's important [to consider] for how long and how often we will be able to provide new tittles.

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