Can Nintendo Rebuild?

Nintendo Co. (OTC:NTDOY) shares finished down 5% for the week at $31.41 a share.  BusinessWeek asks the question: Can Nintendo Rebuild?
The company was unprepared for the sharp drop in Wii sales reported last week. But Nintendo is launching a slew of products for the holidays and exploring new uses of its consoles.

(BusinessWeek.com) Over the past few years, when it was racking up record profits and crushing its rivals in the video game industry, Nintendo often drew comparisons to Apple (APPL). The two had gone against the conventional wisdom to create gadgets and software that consumers couldn't seem to get enough of.

But these days Nintendo is hurting. On Oct. 29 the Kyoto company reported weaker-than-expected earnings for its fiscal second quarter ended Sept. 30. Nintendo also revised downward its forecasts for the fiscal year ending March 2010, saying it expects to sell fewer Wii living-room consoles and game software this year than it had previously thought. A day later, Nintendo President Satoru Iwata told financial analysts and journalists that the company had been unprepared for the sudden drop in sales of its Wii living-room game console. "We sensed that the market mood was cooling off in the spring," he said. "But frankly, we hadn't expected to get as bad as it did by summer." In the past six months the stock has slid 22%

The global financial meltdown and a dearth of hit games have had a chilling effect on the industry's results. In August, Sony (SNE) and Microsoft (MSFT) lowered the price of their machines to spur sales. Nintendo, whose own console sales were flagging, responded with a 20% price cut of its own for the Wii. That move, say analysts, weighed on the company's profits. In the July-September quarter, Nintendo's operating profit dropped 52%, while sales slid 28%. Nintendo now expects full-year profits of $4 billion on $10.9 billion in sales, instead of $5.4 billion in profits and $19.7 billion in revenues. Last fiscal year, the company had its best year ever, raking in profits of $6.1 billion on revenues of $20.1 billion

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 SOURCE: http://www.businessweek.com/globalbiz/content/oct2009/gb20091030_884923....