Nintendo returned to profit in the first half of the fiscal year from a loss a year ago as the Japanese video-game maker erased foreign exchange losses and turned more profit with game-software sales.
Group net profit totaled 46.4 billion yen ($340 milliom) for the six months ended September 30th, an improvement from a 2.9 million yen loss the same period a year ago, the Kyoto-based maker of Super Mario and Pokemon games said yesterday.
First half sales edged down 11 per cent to 188 billion yen ($1.35 billion) from 211 billion yen the previous year. The company did not break out quarterly figures.
For the full fiscal year ending March 31st, 2005, Nintendo Co. Ltd. is forecasting 90 billion yen (€660 million) profit, up dramatically from 33 billion yen in fiscal 2003, on sales of 540 billion yen (€3.9 billion), up 5 per cent from 515 billion yen.
Nintendo said it was able to regain profitability partly because it no longer had losses it racked up the previous year from an unfavorable exchange rate. A strong yen hurts exporters like Nintendo by reducing the value of its overseas earnings.
First half sales fell because a sales boom in a revamped Game Boy handheld machine subsided from a year ago. But Nintendo managed to make profit because it was selling more game software, such as popular Pokemon games, rather than machines, it said.
Software games are cheaper to make than consoles, and game design companies generally make more profit with hit games.
Console sales were expected to pick up in coming months because the Nintendo DS, a handheld machine with two screens, including a touch-panel, are selling in the United States and will hit stores next month in Japan.
Nintendo hopes the DS will appeal to wide audience at a time when it feels video gaming is increasingly dropping in popularity except to a niche crowd.
Nintendo reiterated its view that "the traditional formula for success," graphically stunning, complex games based on sophisticated technology, no longer works.
"While competitive pricing has become increasingly intense, software sales concentrated around only a few popular sports games and movie-based titles that take advantage of the latest technology," it said in a statement. "The business environment is yet in a difficult state."
The competition in handhelds is likely to intensify with the introduction in Japan next month of Japanese electronics and entertainment giant Sony Corp.'s PSP, a portable PlayStation, which will also play music files and video. The PSP is not set to sell overseas until next year.