Nintendo Posts First Annual Loss Ever

2011 was not kind to Nintendo. First, the Wii’s once-clear dominance in the console market was eroded away by the Xbox and PS3. Next, the 3DS didn’t quite sell as many units as the company was hoping for, leading to a price cut that still didn’t boost sales up to where Nintendo needed them to be. All these factors, coupled with a poor exchange rate between the Yen and the Dollar, lead to Nintendo posting an annual loss for 2011 of 37.3 Billion Yen ($458 Million USD), the company’s first ever.

The loss has made Nintendo re-examine their estimated sales for 2012. “Our target this year is not one I am satisfied with,” said Nintendo president Satoru Iwata at a briefing in Osaka. ”Sales of the 3DS in Europe have not been as buoyant as those in Japan…”

But despite the setback, Nintendo is forecasting a return to profitability by the end of the year, bolstered by the release of the Wii U and software titles like Mario Party 8. The company, being the first to offer a new console to market, will likely enjoy a head-start similar to the one Microsoft gained with the launch of the Xbox 360. However, an analyst for CLSA in Tokyo, Nakano Imazu, predicts that Nintendo will have to sell the Wii U for $350 just to break even on the console, making it the more expensive than both the 360 and the PS3.

But despite this bad news, it’s isn’t that grim for Nintendo. Due to the amazing success of the Wii early on, the company is sitting on roughly $14Billion in reserves. It at least has some distance between it and the cliff.

This is a crucial time for the company that defined our childhood. If the Wii U does not return the company to profitability, Nintendo will probably have to do some major strategy changes to stay competitive. One of those potential strategy shifts includes licensing Nintendo’s iconic line of characters to other consoles like Google’s Android platform and Apple’s iOS, the popularity of which are seen as major factors in Nintendo’s lost market share and revenue. Mr. Iwata opposes this move vehemently, and it is assumed that if the Wii U fails, then Iwata will not be with the company for long.

Source: Reuters

Image Source: GameTrailers