Nintendo raises profit estimates to 36 billion Yen

Nintendo has released its first half sales figures, which showed a 6.9 percent sales drop as the GameCube underperformed estimats, but a weakened Yen and growing DS sales have almost doubled profit estimates.

The drop in sales, from an estimated 190 billion Yen to 175 billion Yen was attributed largely to the poor sales of GameCube hardware and software, as third party developers focus their attention on creating new titles for the next generation consoles (including Nintendo Revolution).

Nintendo's senior marketing director Yoshihiro Mori commented: "The big drop for GameCube games was in North America. It looks like the product's life is nearing its end."

In spite of this, sales of the company's handheld device, Nintendo DS have helped boost profits worldwide. In addition, a weaker exchange rate for the Yen has offset the drop in sales, allowing the company to retain its revenue forecasts and increase estimates for the full fiscal year.

Mori stated: "Offsetting the profit shortfall caused by lower sales, a substantial amount of foreign exchange gain was generated due to the weaker-than-estimated Japanese Yen."

Nintendo claims that a substantial development investment in its forthcoming next generation console, the Revolution, has also damaged margins. The new machine is expected to launch in Japan in the spring of 2006; competing with Microsoft's Xbox 360 and Sony's PS3 consoles.

While the GameCube may be nearing the end of its life cycle, and poor sales of both hardware and software have lowered sales figures for the company, increasing sales of its DS handheld are helping to offset the shortfall. In addition, Nintendo holds around USD 4.7 billion worth of dollar-denominated deposits, which have clearly helped revenue forecasts and overall profits, due to the fluctuations in the exchange rate for the Yen.