Nintendo forecasts loss amid weak Wii U sales

Nintendo has been facing strong competition from rival games console makers

Nintendo, the Japanese gaming giant and creator of the Super Mario franchise, has issued a profit warning blaming weaker-than-expected Wii U console sales.

It now expects to make an operating loss of 35bn yen ($335m; £205m) for the financial year ending 31 March 2014.

Its initial estimate was for an operating profit of 100bn yen.

Nintendo said the key reason behind the downgrade was weaker-than-expected sales during the holiday season.

"In the year-end sales season which constitutes the highest proportion of the annual sales volume, software sales with a relatively high margin were significantly lower than our original forecasts," the firm said in a statement.

Losing faith

It said weak software sales were "mainly due to the fact that hardware sales did not reach their expected level".

The company cut its global Wii U sales forecast for the business year from nine million to 2.8 million units - a cut of nearly 70%.

It also reduced the sales forecast for its 3DS console from 18 million to 13.5 million units.

Three months ago Nintendo was standing by its sales projections for the Wii U, despite signs, from the UK at least, that retailers were losing faith in the product.

In July last year, UK supermarket chain Asda said it would no longer be selling the Wii U in its stores.

Online streaming

Nintendo has faced tough competition from rival games console makers, such as Microsoft with its new Xbox One, and Sony with its new PlayStation 4.

There is also a general trend towards online streaming of games to make them available over a variety of devices, such as mobiles and smart TVs.

At the recent Consumer Electronics Show in Las Vegas, Sony announced that PlayStation Now subscribers will be able to play some of the platform's greatest hits without the need to own a console.

Sony said it may offer its games to third-party products as well.

'Disappointing'

This month Nintendo's shares received a boost after China lifted a sales ban on foreign video games consoles.

The Chinese government said it would allow foreign firms to make consoles in the recently-launched Shanghai free trade zone and sell them across the country.

Nintendo's shares have risen 56% over the last 52-week period, reaching a two-and-a-half year high in January, but this latest profits warning - issued after the Tokyo markets closed - is likely to affect the share price on Monday.

"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.