Though the company has had its share of ups and downs over the years, Nintendo has been a profitable company for as long as it has been reporting earnings.
Not so Super
The company is now forecasting a loss of 20 billion yen ($264 million) for its full fiscal year, which ends in March 2012. The news follows a horrific second fiscal quarter for the company.
Nintendo lost 70.2 billion yen ($926 million) between July and September of this year — double what it had warned investors to expect. The company blames the loss on decreased software and hardware sales, price reductions on the Wii and 3DS and a challenging currency exchange.
It's easy to point to the flailing sales of the Wii and the tepid reception of the 3DS as flaws, but the currency problem is an even bigger issue for the company, since it has no control over that situation.
Here's why it's so bad: The yen has been very strong against the U.S. dollar in recent months. Since Nintendo makes money by selling products around the globe, it suffers when it converts that income to yen. (Car manufacturers and electronics companies are suffering from the same issue.)
Weak product sales aren't helping, of course. Nintendo expects its full fiscal year sales to be 790 billion yen ($10.4 billion), which is down 12 percent from its previous forecast. And if it proves accurate, it will fall 211 billion yen (or roughly $3 billion) shy of last year's sales.
The half-year sales numbers tell a fairly dire story. The 3DS hardware saw a spike due to price cuts, selling just over 3 million units, but only sold 8.1 million games. Meanwhile, consumers bought 2.58 million DS hardware units and 29 million pieces of software for that system.
Compare that to four years ago, when Nintendo was at the height of its power. The company then sold just shy of 7 million DS units in a single quarter alone.
Nintendo's stock, which is already at a five-year low, fell another 3 percent among U.S. traders following the earnings. You can buy a share now for just under $18 — versus the $76+ it traded for in 2007.