Nintendo profits drop 74 percent on slow sales of Wii, DS

Nintendo has announced its third quarter earnings and they aren't great. The gaming giant slashed its sales forecasts for Wii and DS and posted a 74.3 percent drop in profit for the last nine months.

With two 4-6 year old products on the market, Nintendo’s iron grip on gaming hardware sales began to show its age in 2010. Today, the game maker posted its financial results for the nine months ending Dec. 31, 2010. They aren’t stellar. Profit during the period fell 74.3 percent from a year ago to about 49.6 billion yen ($599 million). Profits for the last three months were down 46 percent from a year ago. Nintendo blamed its declining profits on “slower sales and appreciation of the yen,” reports CNET.

Due to flagging sales, Nintendo has revised its estimates for the remaining three months of its fiscal year. The company cut its Wii sales forecast from 17.5 million units to 16 million and lowered its sales expectations for the Nintendo DS product line from 23.5 million to 22.5 million. The DS numbers include estimated sales for Nintendo’s upcoming 3DS, pegged at 4 million. (The 3DS doesn’t launch until near the end of March. Nintendo’s fiscal year ends four days later).

As bad as these figures are, this cycle of declining sales is normal as the market slowly transitions from one device to new consoles and handhelds. The Wii still managed to edge out the Xbox 360 in sales over the holidays, though it did not brutally outsell its competitors, as in previous years. Despite the declines in hardware, Nintendo expects Wii software sales to rise 32 million units this year, landing at 170 million in sales.

With competition rising and sales falling, Nintendo will need to begin formulating a plan for its next console sooner rather than later. Previously, executives have stated that the company may wait until 2012 to debut its next console. At this pace, an early 2012 release might be more advised than a late 2012 release. Nintendo does not want to lose all of its momentum going into the next console generation.