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Switch Lite sales help Nintendo beat profit estimates

Tokyo

NINTENDO Co reported fiscal second-quarter profit that beat analyst estimates helped by the boost to software sales from the introduction of the Switch Lite model.

Operating income rose to 66.8 billion yen (S$840 million) in the three months ended September, the Kyoto-based company said in a statement on Thursday. That's more than the 50.5 billion yen average of analyst projections compiled by Bloomberg. Sales were 271.9 billion yen, compared with estimates of 250.8 billion yen. Nintendo left its full-year profit and revenue outlooks unchanged.

Nintendo has stuck with earnings projections that are far below analyst estimates despite a strong lineup of games for later this year and expectations for stronger hardware growth. The launch slate includes a new instalment in the Zelda saga, Luigi's Mansion and two Pokemon games. Nintendo can already claim its first mega-hit smartphone game with Mario Kart Tour, which was downloaded about 124 million times in the first month after launch.

Its full profit potential is probably still ahead, when the app allows users to race against each other online.

"The biggest question for Nintendo is why they still haven't enabled a multiplayer mode in Mario Kart Tour," Jefferies Group senior analyst Atul Goyal said ahead of the earnings release.

"This game already has a massive following and people have been clamoring for multiplayer. But more than a month since launch it still says 'coming soon'. It makes you wonder whether this says something about the speed of decision-making at Nintendo." The company kept its conservative forecast for operating profit of 260 billion yen on 1.25 trillion yen in revenue for the year ending March 2020. That's short of analysts' expectations of 308.1 billion yen and 1.29 trillion yen respectively. The company expects to sell 18 million Switch units and 125 million new software titles this fiscal year.

Nintendo sold 4.8 million units of the Switch hardware in the second quarter, a 50 per cent gain from the same period a year ago. Switch Lite accounted for 1.95 million of that. Sales of software titles rose 48 per cent to 35.9 million units helped by Fire Emblem: Three Houses and The Legend of Zelda: Link's Awakening, which contributed 2.29 million and 3.13 million respectively.

"There are still many people to whom we have yet to communicate the appeal of Switch Lite," President Shuntaro Furukawa said in a briefing in Osaka.

Mobile game revenue was little changed from a year ago, totalling 9.9 billion yen in the quarter. Mario Kart Tour, Nintendo's most anticipated smartphone title, had only a few days to contribute to the earnings in the quarter after its release on Sept 25. The game has been downloaded 123.9 million times and raked in revenue of US$37.4 million in its first month, according to Sensor Tower data.

Nintendo is still working on the multiplayer mode for the game, President Furukawa said, declining to give a specific timing for the release.

Nintendo shares closed little changed at 38,620 yen on Thursday, up 32 per cent this year. BLOOMBERG

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