Nintendo's (OTC:NTDOY) long streak of annual operating losses could finally be over. The video game company today announced earnings results (link opens PDF) for the six months ended Sept. 30 that showed broad improvement and set the stage for Nintendo to potentially book a profit over the full fiscal year.
A Wii U bounce
On the back of strong demand for Mario Kart 8, the Wii U more than doubled its global sales pace to 1.1 million units. The console now boasts 7.3 million units of life-to-date sales. Yes, that's far below the 10 million PS4 devices that Sony (NYSE: SNE) managed in just its first nine months on the market. However, Nintendo's improved hardware selling pace is encouraging for two big reasons. First, it drives more profitable software sales. You can see that trend working already: In the last six months Nintendo managed to sell 9.4 million games for the Wii U as compared to 6.3 million over the prior year period.
Second, that improving console sales pace points to a potentially strong holiday season ahead. In fact, the company is set to release Super Smash Bros. for the Wii U in November, which, together with Mario Kart 8, should give Nintendo its strongest holiday season offering yet as it competes with rival consoles from Sony and Microsoft.
Slipping 3DS sales
The news wasn't nearly as good for the 3DS, Nintendo's handheld gaming platform. Sales of that device slowed to 2 million units over the last six months, or about half the prior year's pace. To date, Nintendo has sold 45 million 3DS consoles compared to roughly 75 million at the same point in the prior generation's life. Nintendo's older DS system stands at 154 million total devices sold.
Software standouts on the 3DS platform in the first half of the year were Super Smash Bros. and Tomodachi Life, which both did particularly well in overseas markets. Meanwhile, Nintendo is aiming to reverse the 3DS's sales slide in the back half of the year, both with new games such as Pokemon Omega Ruby and Pokemon Alpha Sapphire, and with improvements to the hardware like its recent tweak that should make 3D gaming less jarring for some players. "We expect to expand sales [of the 3DS] in the year-end sales season," management said in a press release.
Management's positive outlook
Nintendo also affirmed the full-year outlook that management had originally set back in May. That forecast calls for an overall 3% sales improvement. If Nintendo hits that goal it will make for the company's first revenue gain in five years (annual sales peaked in 2009). Earnings are also expected to mark an important turnaround and come in at 170 million yen per share, which would be Nintendo's first profit since the 2011 fiscal year.
Where the company actually ends up with its sales and earnings performance is anybody's guess, though. As usual, it will all come down to the holiday season, and whether Nintendo can position its hardware and software as compelling buys amid the intense competition for shoppers' dollars.