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Nintendo results disappoint after Wii U fails to find many takers

Nintendo results disappoint after Wii U fails to find many takers

By Agence France-Presse | Updated: 29 January 2014 18:20 IST

The head of Nintendo said Wednesday he would slash his salary in half after announcing a 30 percent dive in nine-month profit on weak demand for its new Wii U console as gamers are enticed by cheap, downloadable games for mobiles.

President Satoru Iwata told reporters he would draw a reduced salary for five months to atone for the downturn, while other members of the board will take a pay cut of between 20 and 30 percent.

When asked if his pay cut could extend beyond June, Iwata said: "I will make a decision after looking at the management situation at that time."

Nintendo management is due to hold an analyst conference Thursday to outline plans for a new business strategy.

The news comes just over a week after the company shocked investors by warning it expects to slip back into the red in the year to March and slashed its Wii U sales forecast owing to weaker than expected holiday season demand.

(Also see: Nintendo reports poor Wii U sales in holiday season, slashes annual target for console)

Analysts have criticised the new system's limited game selection for the poor results, as rivals Sony and Microsoft enjoy robust demand for their new PlayStation 4 and Xbox One consoles.

(Also see: PS4 vs Xbox One vs Wii U - how the new gen consoles stack up)

"Nintendo's worse-than-expected performance is mainly due to a slump in the Wii U," said Hideki Yasuda, a games analyst at Ace Securities in Tokyo.

"They haven't released attractive games titles which has slammed the brakes on sales of the console. Also, its rivals have seen strong demand for their consoles and that is taking market share away from Nintendo."

The three rivals, which largely control the $44 billion global videogames market, are locked in a tough battle against cheap or sometimes free games that can be downloaded on to smartphones and tablets.

Nintendo has also faced criticism for refusing to license some of its iconic brands, such as Donkey Kong and Super Mario, for use on mobile applications.

But Iwata hinted that Nintendo may enter into the mobile games business as it outlines its new strategy on Thursday.

"How to utilise smart devices is the theme of our management policy conference (Thursday)," he said.

On Wednesday Nintendo said it earned 10.20 billion yen ($98.8 million) in the nine months to December as revenue fell 8.1 percent to 499.12 billion yen. It also reported a 1.58 billion yen operating loss.

The company's shares have fallen about 12 percent since it said earlier this month it would make a loss this fiscal year and sell just 2.8 million units of the Wii U worldwide.

That is less than a third of its earlier forecast for 9.0 million consoles, and deals a blow to its hopes of matching the blockbuster success of the original Wii.

To help shore up the embattled stock, Nintendo on Wednesday announced it would buy back nearly 8.0 percent of its outstanding shares.

The grim forecast is especially disappointing for Nintendo after it scratched its way back to profitability last year thanks to a sharply weaker yen, which inflates Japanese firms' repatriated profits.

The company has previously blamed weak earnings partly on high development and marketing costs for the Wii U, launched in late 2012, although sales of its 3DS handheld console and related game titles fared better. It cut prices on both consoles to boost sales.

(Also see: Nintendo announces 2DS handheld gaming device, slashes Wii U price)

This month, Iwata apologised to shareholders for the downturn, saying that "my duty, more than anything else, is to revive our business momentum".

It is not uncommon for Japanese executives who tend to make far less than their US and European counterparts to take pay cuts when results come in below expectations or in the case of unethical behaviour.

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