Reuters

(Reuters)

Nintendo beats forecasts on Mario Wii U lift, on track for full-year profit

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Japanese video game maker Nintendo Co vaulted to an unexpected quarterly operating profit as new game "Mario Kart 8" stoked sales of its Wii U console, bolstering hopes it was on track for its first annual profit in four years.

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A weaker yen also boosted the value of its overseas earnings, and the company on Wednesday reported an operating profit of 9.3 billion yen ($86 million) in its fiscal second quarter, compared with an 18 billion yen operating loss a year earlier. Analysts on average had expected a 3.7 billion yen loss for July-September, according to Thomson Reuters Starmine.

Ahead of the vital year-end holiday sales season, the results may ease pressure on Chief Executive Satoru Iwata, who is recovering from surgery in June to remove a tumor in his bile duct. As losses mounted in recent years, Iwata, 54 and in the job since 2002, resisted calls for a major overhaul to make famous Nintendo characters like plumber Mario available for games on smartphones, rather than just its own hardware.

As well as facing the challenge of free mobile games played on phones and tablet computers, Nintendo has struggled to keep pace with Sony Corp and Microsoft Corp, now dominant in the home video console market.

Nintendo reiterated its forecast for a full-year operating profit of 40 billion yen, compared with an operating loss of 46.4 billion yen in the previous year. Analysts have been skeptical on this year's target, as well as the company's strategy, with the average estimate prior to Wednesday's announcement being for a 24 billion yen profit.

On Wednesday, the company said sales of its Wii U home games console, the latest version of its now-ageing Wii product, more than doubled in the April-September period from a year earlier, rising to 1.1 million units.

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Iwata told reporters that Wii U sales had improved since "Mario Kart 8", the latest game to feature Mario, went on sale in May. With the year-end holiday sales period coming up, he said the company still aims to sell 3.6 million of the consoles in the current business year though March 2015.

"Through April to September we saw sales improve, especially overseas in the U.S. and European markets," Iwata said of the Wii U. "This year is different to last year, when we headed into the year-end without momentum or good software prospects...The goal is fully achievable."

Nintendo said it was also being helped by a cheaper yen, which boosts the value of overseas sales. The yen's downward trend inflated its operating profit by around 2 billion yen over the April-September period, it said.

RETURN TO HEALTH

In his first appearance before reporters since his surgery, Iwata said he now felt well enough to resume regular work duties. The executive was visibly thinner, but said his weight had stabilized over the past two months.

"Of course it was a major illness and surgery, so compared to before, I may shorten the time I'm at work, or perhaps I may cut back on overseas business trips. But in terms of holding meetings, considering strategy, and speaking publicly, I believe I've recovered enough to work as I had before," he said.

As for the business itself, Iwata said Nintendo was heading in a "good direction" ahead of the crucial holiday season.

The company's shares have fallen around 20 percent this year and about 85 percent from their 2007 high, as the heyday Nintendo enjoyed with the Wii console's then-hot status fades into the distance.

Instead of radical strategic change, Nintendo has pinned hopes on hit games such as "Mario Kart 8". The Wii U, the latest version of the console that first hit the market in 2006, was launched in December 2012, but sales had previously fallen short of projections.

The company also maintained its forecast to sell 12 million of its 3DS handheld game players this business year though March 2015.

(1 US dollar = 107.9900 Japanese yen)

(Writing by Ritsuko Ando; Editing by Kenneth Maxwell)