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Nintendo Cuts Profit Forecast on Slow Sales

Entertainment: It cites weak demand for its consoles. News casts shadow on shares of some game publishers.


Nintendo Co., creator of the "Super Mario Sunshine" video game, is heading into financially stormy times as sales of its consoles fall short of expectations.

Buffeted by a weak economy in Japan, the Kyoto-based game company Tuesday cut its profit forecast by 11% to $657 million for its fiscal year ending March 31.

The company cited slower demand in Japan for its GameCube and Game Boy Advance consoles, coupled with a strong yen that devalues sales in North America and Europe, where it reaps more than half its revenue.

The announcement cast a shadow on shares of several U.S. game publishers.

Shares of THQ Inc., which gets 26% of its revenue from Game Boy titles, hit a 52-week low of $18.35 before closing down $1.67 to $19.13. Activision Inc. lost $1.83 to close at $22.10. Electronic Arts Inc., which is more closely aligned with Sony Corp.'s PlayStation 2 console, rose 63 cents to $66.59. All three companies trade on Nasdaq.

Nintendo said it expects to sell 10 million GameCubes during its fiscal year, down from earlier estimates of 12 million. It also cut projected sales of its hand-held Game Boy Advance consoles to 15 million from 19 million. Game Boy Advance software also is expected to take a hit, down 12% to 50 million cartridges.

Sales of GameCube software, where Nintendo makes the bulk of its profit, are expected to exceed estimates by 53%, rising to 55 million copies from a forecast of 36 million.

The results include a $183-million cash gain from selling its 49% stake in Rare Ltd., a Britain-based game developer, to Microsoft Corp. last month.

Analysts say Nintendo's revisions should not be taken as a sign of flagging demand for games. Michael Pachter, analyst with Wedbush Morgan Securities, said better-than-expected sales of GameCube software indicate the reverse--that the video game market is headed for another record year.

As for the weakness in sales volumes, Nintendo pointed to an extended recession in Japan and weak demand in Europe. Sales in North America, however, remain strong, the company said.

"Things are healthy here in the U.S.," said Perrin Kaplan, vice president of marketing for Nintendo of America. "We continue to expect growth here."

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