Monday, September 10, 2007

Nintendo’s Near Term Outlook Gets Clouded

Nintendo’s rumored problem ramping-up production of the Wii console and the company’s failure to comment casts a cloud over the near term outlook for its common stock. That outlook is further clouded by the weakness of the dollar.

In its last forecast dated July 25, 2007, Nintendo modified its projected fiscal 2008 earnings to reflect sales of 16.5 million Wii units, which was up from the 14 million units forecast in its April 26, 2007 release. At the same time, it revised its earnings to reflect an exchange rate of 118 yen per U.S. dollar versus its previous forecast of 115.

Since the last Nintendo investor release, the dollar has collapsed to 113 yen on September 10, 2007. If that exchange rate persists, it will cause a downward revision in earnings of approximately 30 billion yen ($266 million) in fiscal 2008.

Nintendo is not expected to release the results of its second quarter until the latter part of October, 2007. An upward revision in earnings in October similar to what it did last year seems unlikely.