Nintendo sees slowdown ahead

By Kiyoshi Takenaka and Yumi Horie

TOKYO/OSAKA (Reuters) - Nintendo Co Ltd reported a 42 percent fall in quarterly operating profit as the yen's strength outweighed robust game sales, and the Japanese video game maker forecast a bigger-than-expected 12 percent profit decline this year, pressuring its shares.

Despite the slide in quarterly profit, Nintendo has fared much better than many other consumer electronics makers. Sony Corp, for instance, is deep in the red, hurt by a strong yen, feeble demand and ballooning restructuring costs.

Nintendo, vying with Microsoft Corp and Sony, has weathered the financial crisis relatively well as consumers continue to spend on games seen as affordable entertainment while cutting back on big-ticket items such as cars.

Nintendo expects its operating profit, a measure of a company's core earnings strength, to fall 11.8 percent to 490 billion yen ($5 billion) in the year to March 2010 due to a firmer yen. That is about 5 percent below a 517.4 billion yen profit consensus in a poll of 25 analysts by Thomson Reuters.

It would be Nintendo's first annual operating profit decline in four years.

At the net level, Nintendo forecast a 7.5 percent rise in profit this financial year to a record 300 billion yen, falling short of the market consensus of a 325.7 billion yen profit.

"It is true these numbers are below market expectations. But they are not at all surprising as they tend to make conservative predictions at first," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

"Having said that, a period of break-neck growth now seems to be behind them," he said.