TOKYO (Reuters) - Nintendo's shocking profit battered its shares as much as 20 percent, underscoring deep challenges for an iconic brand struggling to win back users flocking to other gadgets.
The plunge wiped off $5 billion from Nintendo's market value after the company said profits would fall to their lowest in 27 years as it braced for losses from its latest 3D gadget.Brokers cut the company's forecasts, a day after it swung to a quarterly loss and slashed prices of its 3D-capable handheld games device by about a third.
With sales of its DS and Wii fading, Nintendo was relying on the new 3D model to revive profits and fend off renewed competition from motion-gaming peripherals of Sony Corp and Microsoft. Many casual gamers are also flocking to devices such as Apple's blockbuster iPhone and iPad.
"They are standing on the edge," said Yuuki Sakurai, CEO and president of Fukoku Capital Management in Tokyo. "When I ride on the trains I see people using their smartphones to play games and people don't want to overlap their spending on other devices," he said.
The Kyoto-based company must consider providing games to these new platforms rather than focusing on new hardware, Sakurai said.
Nintendo President Satoru Iwata took a 50 percent pay cut, and other executives took 20-30 percent cuts to take responsibility for the poor performance.
The company also reduced sales forecasts for its Wii home games console and the previous generation DS handheld device.
"We needed to do something extremely daring to change the situation, so we decided on the price-cut," said Iwata, a former game designer, who launched the Wii and expanded the gaming population, toppling Sony from the industry's top spot.
Nintendo's shares fell as much 20 percent on Friday to 11,100 yen, its lowest intraday level since May 2004. They ended down 12.2 percent on the day, for a drop this year of nearly 50 percent.
Speaking to reporters in Osaka on Thursday, Iwata acknowledged sales of the much-anticipated 3DS had lost momentum shortly after the launch earlier this year.
"However, by cutting the price before you get economies of scale, of course you make losses on the hardware," he said.
Nintendo sold only 710,000 units of the 3DS in April-June, compared with 3.6 million in the month following its launch, and a tiny fraction of the 16 million unit target for the year to March 2012.
The Wii sold only 1.56 million units, half the figure in the same period last year. The device took the industry by storm five years ago by replacing button clicking with motion control, attracting a new wave of gamers that expanded the market.
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