Nintendo Boosts Earnings Projection and Dividend Payout (NTDOY)

| About: Nintendo Co., (NTDOY)

The Nikkei Shimbun reports that Nintendo Co. Ltd. (NTDOY.PK) has revised upward its projected January-March quarterly consolidated net income by 9% to 95 billion yen (US$808m). Previously it had expected a 14% decrease at 75 billion yen (US$638m).

Nintendo is crediting its revision to a favorable FOREX market where a weak yen creates larger overseas sales profits and it also expects to earn a FOREX profit from its overseas operations. With higher expected profits, Nintendo will return a larger portion to shareholders by boosting its year-end dividend to 300 yen, from 200 yen last year, which means its total annual dividend will total 370 yen, compared to 270 yen last year.

According to the Nikkei Shimbun, it appears Nintendo has maintained its prior estimate of a 3% decrease in sales at 500 billion yen (US$4.25b). Meanwhile, operating profit is expected to increase 10% over last year to 160 billion yen (US$1.36b).

Despite lower expected sales, Nintendo is operating more efficiently and profitably. The outlook for Nintendo’s console and game sales should be positive going forward with sustained strong sales of handhelds and seemingly more interest in its next-generation forthcoming console, Revolution (launch date sometime by the end of '06).

Nintendo has made the news recently for one of its games ("Brain Age") that is geared towards an older audience in which it challenges the elderly with math and other brain stimulating questions.

Nintendo President Iwata recently addressed concerns about the Revolution's storage capabilities by assuring everyone the console will come equipped with an SD memory card slot, in addition to the 512mb internal flash, and it will have USB ports for adding an external hard drive. (source: engadget) I find this to be an interesting approach and if it can keep production and unit retail sticker costs down, it might be more attractive to consumers, especially those shopping for children.

I like Iwata's leadership and his call out to the video game industry to bring video games to a wider audience. He used the term "disruptive" for the Brain Age software. Iwata is on to something here and is said to have a number of surprises behind the Revolution. While the DS is popular and still in high demand, for the sake of shareholders the Revolution must be revolutionary in order for Nintendo to grab back market share and boost profits from strong sales and not just FOREX. The timing of Revolution's launch will also be key.

NTDOY 1-year chart: