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Nintendo Issues Loss Warning

October 04, 2003|Alex Pham | Times Staff Writer

As it struggles to score points against larger rivals Sony Corp. and Microsoft Corp., Nintendo Co. on Friday warned of its first loss since the Japanese video game maker went public in 1962.

The maker of the popular Game Boy hand-held player estimated a $27-million loss in the first six months of its current fiscal year, contrasted with the $100-million profit projected in May.

For the year ending March 31, Nintendo forecast net income of about $542 million, down nearly 8% from an earlier estimate of $588 million.

Nintendo executives blamed a stronger yen for the showing but did not cut the firm's full year forecast of $5 billion in sales -- most of which occurs outside of Japan.

"The company keeps large cash deposits in the U.S.," said George Harrison, Nintendo's executive vice president for marketing in North America. Harrison said the strong yen eroded the face value of those holdings. "We've gone from an exchange rate of 119 yen per dollar to 111 yen at the end of September."

Nintendo has $4.5 billion in dollar-denominated deposits.

But the news comes as Nintendo struggles to pull itself out of last place among console makers and overcome its image as a purveyor solely of children's games. Once virtually synonymous with video games, Nintendo and its flagship GameCube console lag far behind Sony's PlayStation 2 and Microsoft's Xbox in North America.

Last week, Kyoto-based Nintendo pared the price of GameCube to $99 to boost sales.

"It's not that Nintendo doesn't have hit titles," said Michael Pachter, vice president of research at Wedbush Morgan Securities. "It's that they don't have enough of them."

Industry watchers said Nintendo's lineup of games for the crucial holiday season may not push it past Microsoft, its nearest competitor.

"They don't really have a killer" game, said Dan Hsu, editor in chief of San Francisco-based Electronic Gaming Monthly. "Their one big title this year is 'Mario Kart Double Dash,' which is really fun, but it's not going to be a blockbuster."

Nintendo, however, continues to dominate the hand-held games business with its Game Boy Advance, which contributes nearly half of its revenue. It expects to sell 20 million Game Boy Advance SP consoles this fiscal year, compared with 6 million GameCubes.

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