Nintendo profit concern over currency market gyrations

Nintendo's Iwata on currency fluctuations

Nintendo has said that ongoing currency gyrations could have a significant effect on its profits.

The creator of the popular Wii gaming console has a market value in excess of $85bn (£57.2bn) and is now Japan's third most valuable listed company.

Talking to BBC News, company president Satoru Iwata said instability in the global economy was having an impact.

This meant, he said, that there was uncertainty about how Nintendo could estimate its profits.

He also said that government needed to do more to bring ongoing currency fluctuations under control.

Currency impact

Nintendo, like rival Japanese games firm Sony, exports the majority of its hardware and video games to Europe and the US.

With fixed prices at the tills, along with distribution, retail and transport costs, any devaluation of the local currency can have a direct impact on how much money console manufacturers will make.

"If the Yen, or any currency, changes over one, two or three years, then that is something that we corporations have to deal with," said Mr Iwata.

"However, if over a week a currency fluctuates by five or ten percent, there has to be something seriously wrong with the economy.

"From that perspective, we cannot say our [global] economy as a whole has been stabilised and there is uncertainty on how to estimate our profits," he said.

"The Euro is just one of the most recent examples of the issues we have been observing in the currency market since the shock of Lehman Brothers," he added.

Falling sales

Figures released by Gfk Chart-Track suggest that overall console sales in the UK fell by almost a third in the first six months of 2010, mostly due to declining interest among shoppers in Nintendo Wii and DS handheld devices.

Start Quote

Whenever we launch any new hardware, we start working on the development of the next hardware, and the Wii is no exception”

End Quote Satoru Iwata President, Nintendo

By contrast, both Sony and Microsoft have reported an uplift in sales. Sony Computer Entertainment's chairman, Kaz Hirai, said it had seen increases in year-on-year sales for its PlayStation 3 console system, for the past 10 consecutive months.

But while Microsoft and Sony are updating their existing TV gaming systems with new motion controllers, Nintendo has, at present, no public plans to replace its Wii gaming system, although Mr Iwata said one was being worked on.

"Whenever we launch any new hardware, we start working on the development of the next hardware, and the Wii is no exception," he said.

"When we run out of ideas with the current hardware and cannot give users any more meaningful surprises with the technology we have, that's when we will launch the new hardware.

"But do we need to launch a successor to Wii right now? I don't think so."

Nintendo's share price has risen since the start of the year, with a sharp leap in March 2010 when the firm announced it was to launch an updated version to its DS handheld system that would display 3D images without the need to wear glasses.

Despite some correction in the market, Nintendo shares have risen from ¥21,590 (£159) in January this year to a high of ¥28,740 (£212) in June.

Nintendo unveiled its new 3D handheld gaming system at a briefing in Los Angeles at the E3 games show.

Called 3DS, the system has two screens and can display 3D images that can be seen without using special glasses.

Nintendo said the novel handheld is designed to replace the existing DS and is scheduled to be on shop shelves in the next 12 months.

The gaming giant said it had overhauled the graphics system on the DS to bring it into the 21st Century.

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E3 GAMES SHOW 2010

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