Nintendo president Satoru Iwata has explained to shareholders that Nintendo needed to take drastic measures with the Nintendo 3DS as sales of the console were falling far below their initial expectations. Iwata pointed out that Nintendo will reassess the situation four months after the price cut to work out what needs doing next.
As we announced at the E3 show, which was held in Los Angeles this past June, we have a strong software lineup for Nintendo 3DS toward the end of this calendar year, with which we were thinking that we would be able to boost the hardware sales, but in terms of the current situation, for us to be able to help Nintendo 3DS to become a sound successor to Nintendo DS, and to get it back on track to its originally-anticipated sales pace for its wide expansion, we concluded that we needed to take drastic measures, and we decided to make the markdown.
First, since the launch of Nintendo 3DS, one of the things we have learned is that it has taken longer than we had originally expected in order for the appeal of this product to widely spread.
Another reason is, we thought that eliminating the concerns of future hardware expansion early on would make a great difference to how retailers and software publishers will allocate their energies.
In short, we have concluded that, for Nintendo 3DS to expand enough to become the successor of Nintendo DS, we have to take a drastic approach.
More specifically, I hope you will at least try to see how it will play out over the next four months, until the end of the year-end sales season, before making any judgments.
On the other hand, a drastic markdown like this, before the mass-production effect can take place for the hardware, will naturally generate red ink on the hardware sales. As a result, a significant minus effect is expected on the profitability of the current fiscal year. Even though we understand this, for us to elevate Nintendo 3DS to be the platform that can sustain our business, we have concluded that we need to take the best possible measure we can take now, even at the cost of short-term profitability.
It is quite unusual for us to change the price in less than half a year from a products launch. I am aware that realizing both the short-term and the mid-to-long term profits is one of my responsibilities as part of the management. I feel greatly accountable for having to make the markdown shortly after the launch, for having damaged our consumers’ trust, for having made a significant impact upon the financial forecasts, for the annual dividend now being expected to be significantly less than originally expected and for now forecasting that there will be no interim dividend.
However, for the management to show its accountability for the level of the operating loss of this time and the prospect of no interim dividend, we decided at the directors’ meeting yesterday that we would reduce the compensation we will receive as the directors of the company.