Nintendo to persist with console strategy, ignores calls to go mobile

TOKYO Thu Jan 30, 2014 1:19pm IST

Hong Kong's Chief Executive Leung Chun-ying attends the Asian Financial Forum in Hong Kong January 13, 2014. REUTERS/Tyrone Siu

Hong Kong's Chief Executive Leung Chun-ying attends the Asian Financial Forum in Hong Kong January 13, 2014.

Credit: Reuters/Tyrone Siu

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TOKYO (Reuters) - Nintendo Co Ltd (7974.T) dug in its heels on a game console strategy that has dragged it into operating losses for three years in a row, ignoring calls to go mobile and promising instead to wow customers with health-related innovations.

Investors were unimpressed, wiping $1.2 billion from the value of Nintendo's Tokyo-traded shares in little more than 30 minutes on Thursday, as CEO Satoru Iwata made his pitch for a "non-wearable" project in 2015 to help users stay healthy.

The maker of hits like Super Mario and the Legend of Zelda has been under pressure to branch out from its underperforming consoles and capitalise on the spread of smartphones and tablets by releasing games that can be played on any mobile device.

But Iwata was resolute that Nintendo would not take Mario mobile, just a day after Chinese computer maker Lenovo Group Ltd (0992.HK) declared its mobile ambitions with a deal to buy Google Inc's (GOOG.O) Motorola handset division for $2.9 billion.

He said mobile devices had a role as marketing tools to help potential customers "understand the wonder of Nintendo games," although those games would still need to be played on Nintendo consoles.

"I'm not pessimistic about video games. We are not going to change our essential business of offering integrated hardware and software platforms," Iwata said.

Nintendo's shares fell after Iwata's remarks, adding to the heavy pressure the stock has come under since the company announced earlier this month that it would post its third annual operating loss in a row.

The stock closed down 4.3 percent at 12,325 yen after rallying as much as 7.5 percent to 13,850 yen earlier in the session, when investors welcomed the company's plan to buy back up to 125 billion yen worth of its shares.

FUN AND GAMES

Iwata announced on Wednesday that he would take a 50 percent pay cut for the next five months, while other board members would reduce their salaries by 20 percent, after admitting the company had failed to convince customers of the merits of its Wii U console.

Nintendo cut its full-year sales forecast for the console to 2.8 million from 9 million on January 17. On Wednesday the company said its operating profit fell 6.9 percent in the October-December quarter to 21.7 billion yen. It expects a 35 billion yen loss for the full year to end-March.

Iwata said Nintendo was aiming to make an operating profit next year, with the handheld 3DS console driving profits. The company also had a big enough warchest to sustain it through a few more years of losses with 966 billion yen of net cash at the end of December.

The CEO was vague about the details of the new health business, hinting that the device or service could be used "beyond the living room" unlike the sports and fitness games available for its Wii and Wii U consoles.

"I'm sure you're thinking of Wii Fit, but this is not like anything we have made before," Iwata told a briefing of analysts and reporters.

"Looking after your health requires effort and many people quit quite soon after starting something. But we, as an entertainment company, can help people get over the difficulty of continuing their efforts in a fun way."

He also said there would be a merging of handheld and home game console software architecture, suggesting that users would be able to download and play the same game across platforms in the future.

Rival Sony Corp (6758.T) is launching a similar cloud-based service this summer for its Playstation and handheld Playstation Vita consoles.

(Editing by Stephen Coates)

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