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Wii's "Roaring Growth" Over?

Kris Graft's picture

By Kris Graft

January 29, 2009

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Japanese analyst concerned about Nintendo's forecast reductions.

Nintendo has vastly outstripped competitors this hardware generation, selling nearly 100 million DS handhelds and 45 million Wiis to date.

But when Nintendo said it would be slashing full-year net income forecasts by one-third to $2.55 billion, analyst Hiroshi Kamide with KBC Financial Products speculated that the Wii craze may be burning out--an almost unthinkable prospect amongst many industry watchers.

“Today’s revision suggests that the roaring pace of Wii growth that we’ve seen until now may be over,” he said in a report in the Times.

“The numbers also imply that we are going to see a sudden collapse in the fourth quarter from record margins to some of the thinnest margins Nintendo has experienced for three years.”

Nintendo also drew back Wii unit shipment forecasts for the full year by 1 million units to 26.5 million.

Kamide added that Nintendo may "know something big has gone wrong, and that people are not buying the machines."

The analyst rates Nintendo shares at "sell," a rarity among games analysts.

General commentary amongst English-speaking Internet outlets and anecdotal evidence suggest that gamers had trouble finding Wii hardware at retail during the holidays, although the supply situation has improved over the past months as Nintendo ramped up production.

Other U.S.-based analysts still believe Nintendo has strong fundamentals, but a strengthened yen has negatively affected the exporter of software and hardware.

Softening Japanese sales have also hurt Nintendo, although strong North American and European sales have partially offset the shortfall, said Wedbush Morgan's Michael Pachter, who rates Nintendo shares as "buy."

Arvind Bhatia with Stern Agee was also less alarmed as Kamide in his assessment. "We do not necessarily view the reduction in forecast as a negative given Nintendo has been increasing its forecast all year.

"Rather, we think supply constraints during the holiday season resulted in Nintendo losing sales and management is now factoring this in its revised forecast. We note that Wii hardware was out of stock in the US in late December/early January.

yoshter's picture
On January 30th yoshter said:

A great as its been that Nintendo has opened up new markets, the only downside to the casual push is that theres no guarantee that those consumers are still going to be gamers in another five years. Casual gaming is great, but it also makes gaming more dispensible.

Dan_Chippendale's picture
On January 30th Dan_Chippendale said:

Simple, a sponge can only soak up a certain amount of water until it's saturated

savagehenry's picture
On January 30th savagehenry said:

Fair comment... Nintendo had to run out of stream at some point. It’s just a shame that their hand was forced by other circumstances. Hardware sales may suffer short term in Japan. But wait till the eagerly awaited Monster Hunter 3 make an appearance in that territory, I bet we'll see a spike in sales around that period.

With those sort of numbers owning Nintendo hardware, they have a captive audience in my opinion. Considering what’s under the hood of the Wii, they are still the only company to truly push home entertainment forward, offering casual gamer are unique experience, some thing that the other two consoles can't imitate.

Ozzman_79's picture
On January 30th Ozzman_79 said:

"Wii hardware too has seen a revision in sales projections, with Nintendo trimming its expectation both software and hardware figures down by 3 percent."

Sure guy, 3% drop equals "Roaring paced Wii growth that we’ve seen until now may be over." Alarmist much?

Kenology's picture
On January 30th Kenology said:

Nintendo cuts back shipment forcasts by a million and people freak. The Japanese market is shrinking, folks. Didn't everyone see the stories about the UK market set to overtake the Japanese market?: http://www.guardian.co.uk/technology/gamesblog/2009/jan/29/games

If Nintendo's surging growth is over, imagine how down and out the PS3 and 360 will be in Japan. It's scary to think about.

Fernicum's picture
On January 30th Fernicum said:

I think you're right on the money there Belcaw.

Belcaw's picture
On January 30th Belcaw said:

Of course, this could be in anticipation of letting the current stock run out in order to release a revised version of the Wii. Seems likely since there are a few key areas that Nintendo needs to fix. I would guess that a revised Wii would have larger internal storage for downloads and have bulit-in Wii Motion Plus. They would likely include the new Wii Sports as a pack-in in order to best demonstrate the new technology as well.

But to do this, they need to sell off the existing stock of consoles so they can minimize or even eliminate the need to do a temporary price markdown in the same way Microsoft and Sony did when they were phasing out existing models for newer updated hardware.

Just my 2 cents.

-belcaw

chakkerz's picture
On January 30th chakkerz said:

Belcaw - valid point, and you might be right about the modifications ... well at least the Motion Plus and new software anyway. Increased internal storage i'm not so sure about... might make sense...

However i don't see the first two as being something that would need a sell-down of stock but as an alternate box, maybe new Wii mote with the motion plus integrated, (i assume the nunchuck still plugs in the bottom), but even that would not require a sell-down. The internal storage ... maybe .... but it's just a chip, so that could be addressed with a revision, and even then they wouldn't need to bridge the gap because they could drop the price on the lower spec, bundle the motion plus and new game, and if they were really THAT worried, add an SD card. In that case, they might not need to change the price at all...

You have a point, but i'm guessing that they have seen something else about the economic situation or market saturation. Maybe they've realised the can't make a release date on a killer app. The decrease sounds dramatic ... but i don't see it as being a bad thing as such...

Maybe you're right ... it does have a good ring to it, the more i think about it...