Nintendo reported its earnings (PDF) for the fiscal quarter that ended in June, revealing that the Nintendo 3DS’s margins have shrunk, although the console is still selling at a slight loss.1
This report comes months after Nintendo’s first annual loss in thirty years (PDF), which saw the company suffering a ¥43 billion (approx. $550 million USD) net loss in the past year after a 30% sales drop.
The Nintendo 3DS, which Nintendo had been selling at a loss since August after a price cut, had been a contributing factor in the company’s disappointing performance last fiscal year. However, Nintendo managed to cut selling and administration expenses, which helped the gaming giant stop losing money on 3DS sales.
Nintendo still recorded a ¥17.2 billion (approx. $220 million) net loss for this fiscal quarter. However, compared with the ¥25.5 billion (approx. $326 million) net loss during the same quarter last year, this is an improvement. Nintendo remains undaunted by these continuing losses, affirming its earlier prediction that it will record a ¥20 billion (approx. $256 million) net profit for this fiscal year.
Nintendo also stated that it sold 1.86 million 3DS units during this time, which raises its lifetime sales to 19 million units sold.
Analysis: You have to give Nintendo credit for running a tight ship. In an interview with the Independent, Satoru Iwata outlined the reason behind the decision to sell the 3DS at a loss:
[One of the factors in Nintendo’s first annual loss was] that when we launched the Nintendo 3DS last year it lost momentum after launch, so we had to take measures and cut the price in order to avoid a failure toward the end of the year, which meant we were selling Nintendo 3DS units at a loss.
Iwata went on to state that he intended to solve that problem this year, and it seems like he actually managed to do it. The company remains optimistic despite being at its weakest state in three decades, so much so that it predicts that it will be able to record a net profit of ¥20 billion, an increase of ¥63 billion (roughly $805 million) over last year.
Nintendo’s no doubt a little bit shaken from the trouble it ran into with the slow growth of the Nintendo 3DS, but it seems like they’ve gotten back on their feet and are pushing ahead, leaving their moment of weakness in the past.
1 – An earlier report stated that Nintendo had stopped selling the 3DS at a loss. This was an error and has been corrected. (CEB @2254, 7/25/12)