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Nintendo heads for third consecutive annual loss as Wii U flops

Men ride an escalator past Nintendo Co advertisements at an electronics retail store in Tokyo April 23, 2013. REUTERS/Toru Hanai
Men ride an escalator past Nintendo Co advertisements at an electronics retail store in Tokyo April 23, 2013. REUTERS/Toru Hanai

By Chang-Ran Kim

TOKYO (Reuters) - Nintendo Co Ltd said on Friday that sales of its Wii U consoles had flopped, pushing it to a third consecutive annual loss and raising a question mark over its future in a home console market increasingly dominated by Sony Corp and Microsoft Corp.

The company that got its start making playing cards more than a century ago slashed its global Wii U sales forecast for the year to March 31 by almost 70 percent to 2.8 million units. It cut its sales forecast for its handheld 3DS to 13.5 million units from 18 million. The Wii U is the successor to its hit Wii console.

Nintendo's president, Satoru Iwata, who last year pledged to return the hobbled game maker to profit this business year, apologized to shareholders at a briefing in Osaka, but said his failure to fulfill his promise did not mean he had to resign.

"There will be no major management shake-up in the short term," Iwata told reporters.

Pressure will likely mount on the architect of the Wii success in 2006 to step aside or shift course to focus on making money from "Super Mario" and other software titles. Nintendo so far has refused to allow its games to be played on machines built by competitors or on tablets or other mobile devices that are used by gamers.

In the past the company has blamed a lack of titles for poor sales, but even its popular family-friendly games are losing out on sales to more hard-core titles like "Grand Theft Auto" played on rival machines.

"The fact that the 'Wii U strategy' has failed is disappointing and will likely trigger a sell-off as soon as the market opens," said Makoto Kikuchi, chief executive of Myojo Asset Management.

Nintendo this business year now expects an operating loss of 35 billion yen ($335.76 million) compared with an initial forecast for a 100 billion yen profit. The new estimate also falls drastically short of the average forecast of a 54.7 billion yen profit in a survey of 18 analysts by Thomson Reuters I/B/E/S.

The latest warning comes just three months after the Japanese company reiterated its sales projections for the Wii U, counting on the console to revive its fortunes as Microsoft released its new XBox One and Sony released its PlayStation 4 to the public.

"We failed to reach our target for hardware sales during the year-end, when revenues are the highest," said Iwata.

In 2006, Iwata was celebrated worldwide after creating a new niche with the Wii console designed for the whole family to use rather than hardcore gamers. That success boosted Nintendo's cash pile to around $14 billion, money it will have to dip into again to help cover its latest deficit.

Nintendo on Friday also warned of a net loss of 25 billion yen for the year ending on March 31, a substantial reversal from its prior projection of a 55 billion yen profit. It now expects revenues of 590 billion yen, down 36 percent from its prior forecast. It cut its full-year dividend to 100 yen from 260 yen.

Nintendo shares have fallen almost 10 percent since hitting a two-and-a-half year high of 15,880 yen on January 10. The stock climbed 55 percent in 2013, in line with a 57 percent rally by the benchmark Nikkei average but underperforming a 91 percent surge by rival Sony.

($1 = 104.2400 Japanese yen)

(Additional reporting by Ayai Tomisawa, Dominic Lau and Reiji Murai; Writing by Tim Kelly; Editing by Edmund Klamann and Matt Driskill)

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