Nintendo's Profit Falls as Product Line Faces Steep Competition

Nintendo is surrounded.

On the home console side of the business, there’s Microsoft and Sony with new motion-detection systems similar to the Wii. On the Japanese game maker’s popular handheld side of the business, there’s Sony’s new offering–announced today–and dozens of smartphone makers, from Apple to HTC.

All of that added up to fewer sales of Nintendo’s Wii and DS platforms in the third quarter, and there’s not much relief in sight.

Nintendo cut its sales forecast for the Wii console by 1.5 million units to 16 million for the year. It also lowered its DS sales forecast by 1 million to 17.5 million units (but raised it to 22.5 million units, including the sales of the upcoming release of its new handheld, which will offer a 3-D experience that doesn’t require glasses).

Today, Nintendo reported net sales for the nine-month period ended Dec. 31 of 807.9 billion yen ($9.8 billion), down from 1.18 trillion a year ago. Net income shrank to 49.6 billion ($603 million) from 192.6 billion in 2009.

For the same period in 2010, Nintendo said it sold 15.7 million DS units, with about half of those sold in the U.S. That’s down from 23.4 million in 2009. The company also said it sold 13.7 million Wii units worldwide in 2010, fewer than the 17 million sold in 2009.

Its financial forecast remains unchanged from revised figures released in September.

The company said in its earnings release that “Nintendo continues to pursue its basic strategy of ‘Gaming Population Expansion’ by offering compelling products that anyone can enjoy, regardless of age, gender, or gaming experience.”

But it seems that is also the goal of others, like Microsoft, which has been able to rapidly expand the audience for the Xbox by releasing the hands-free Kinect accessory. It sold eight million in its first 60 days on market. Sony has also released the Move, and today announced a next-generation handheld gaming system that beats Nintendo’s upcoming 3DS at least on one front–it comes with wireless 3G.

Photo Credit: Clevercupcakes

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There’s a lot of attention and PR around Marissa, but their product lineup just kind of blows.

— Om Malik on Bloomberg TV, talking about Yahoo, the September issue of Vogue Magazine, and our overdependence on Google