Nintendo's surprising announcement that it is cutting its profit forecast by a full third has led some analysts to suggest that the seemingly limitless demand for the Wii console may in fact be slowing.
Nintendo will still show a huge profit for 2008, but the new projection of roughly $2.5 billion in net income is considerably less than the $3.8 billion it had predicted in October. The company also said it expected to sell one million fewer Wii consoles than anticipated.
While Nintendo's strong third-quarter results, which include the lucrative Christmas sales period, resulted in operating profits 21 percent higher than the previous year, analysts called the revised forecast "baffling and potentially very worrying." Nintendo's 2008 fiscal year ends on March 31.
"Today's revision suggests that the roaring pace of Wii growth that we've seen until now may be over," said KBC Financial Products analyst Hiroshi Kamide. "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."
Some industry sources say demand for the Wii has dropped off due to a lack of "must-have" titles for the system compared to even six months ago, while the dramatic rise in valuation of the yen over 2008 has cut a large chunk out of Nintendo's profits. And based on Nintendo's reputation for staying in close contact with its retailers around the world, Kamide said the revision could mean that Nintendo sees trouble coming. "They know something big has gone wrong, and that people are not buying the machines," he said.