In the past few years Nintendo has been sailing along rather mightily on the wind of its successful Wii and DS platforms and their software, but this year it seems stormy weather has battered their ship and left it worse for wear. For the nine-month period ending Dec. 31, 2010, net income dropped an incredible 74% to ¥49.56 billion ($598 million) from ¥192.60 billion ($2.33 billion) while Revenue dropped 33% to ¥807.99 billion ($9.77 billion) from  ¥1.182 trillion ($14.29 billion).

Worldwide hardware sales figures suffered the most with the Wii sporting a 20% drop to 13.72 million units from 17.05 million units in 2009. The numbers for the DS dropped an incredible 33% to 15.70 million units from 15.70 million units in 2009.

Software numbers for the Wii, while not experiencing a rise, are surprisingly high considering the drops in all other aspects of Nintendo’s sales. Experiencing only a 4% drop over 2009’s sales numbers of 157 million, the Wii sold 150 million units of software. The DS on the other hand didn’t fare as well, experiencing an 18% drop to 99 million units down from 121 million units in 2009.

As a result of slower than expected sales in the holiday season, Nintendo has made adjustments to its hardware forecasts for this fiscal year. Wii hardware forecasts have been bumped down 1.5 million units to 16 million units from the original estimate of 17.5 million units. The DS experienced a slightly smaller bump down to 18.5 million units from 19.5 million units. Nintendo’s expectations for the software on these consoles, however, is expected to rise. Wii software forecasts have been hiked an amazing 23% to 170 million units, up from the previous estimate of 138 million units. DS software forecasts have been boosted to 120 million units from 110 million units, or about 9%.

A substantial portion of Nintendo’s drop in profits can be attributed to a re-evaluation of foreign assets against a strong Japanese Yen. Reevaluation of assets in foreign currencies represented 84.4 billion of the claimed losses, which accounts for about 59% of the drop in Nintendo’s profits. The rest has been attributed to the slower sales of hardware and software so far this fiscal year.

Interestingly, Nintendo’s new heavyweight in the portable gaming ring, the 3DS, is forecasted to sell 4 million units worldwide by the end of the fiscal year on March 31, 2011 despite a late launch on February 26, 2011, March 25, 2011, and March 27, 2011 in Japan, Europe, and North America respectively. Software for the new console is expected to hit 15 million units sold in the same timeframe.

What does this all mean? Nintendo’s drop in sales in the DS market is likely attributable to consumer demand for the 3DS. Rather than spend their money on current generation DS consoles, some consumers have opted to wait until the launch of the 3DS and spend their money at that time. The drop in sales for the Wii console could be indicative of a much bigger problem that stems from a more affordable PS3 and Xbox 360 and quite possibly further competition from the release of motion control options for both of those consoles in the Move and Kinect respectively.

The overall drop in profits might be the first glimpse at a darker future for Nintendo. While Nintendo has seen success in recent years, many desires of the hardcore gamer have gone unanswered with this generation of Nintendo’s consoles.

A proper online community for Nintendo’s home consoles has eluded hardcore gamers during this console cycle, despite hopes that Nintendo would bring an online offering to the table. Similarly, the power of the Wii has left it graphically challenged as the Xbox 360 and PS3 have instead paved higher expectations all around. Thankfully, Nintendo itself has continued to provide excellent titles for the console, but third party development for the most part has been lackluster.

If this sales trend continues into this next year, perhaps Nintendo will be forced to move to its next generation home console sooner than planned. The future success of the current console will no doubt rest with the casual gamers who have purchased the Wii due to the novelty of motion control. If that novelty is now wearing off, Nintendo may have to make great strides to appeal once more to the hardcore gamer, while remaining truly competitive with the opposition’s next generation of consoles.

Do you think that these reports are a sign of darker times ahead for Nintendo, or just a blip on the successful reign Nintendo has enjoyed thus far in this console cycle?

tags: 3DS, DS, Nintendo, Wii

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