3DS sold under cost since price cut, Nintendo 'hoping' to profit by March 2013
Nintendo took a big hit last year when it dropped the price of its then-nascent handheld, the 3DS, to $170 just a few months after initial launch. Such a hit, apparently, that Nintendo is selling the unit for less than it costs the company to produce, as revealed in the company's latest financial earnings. "Its hardware has been sold below cost because of its significant price cut in the fiscal year ended March 31, 2012," the financial report says.
But don't count Nintendo out! The company says it "expects to cease selling it below cost by the middle of the fiscal year ending March 31, 2013." Which, in normal human terms, means Nintendo expects to start making money on the console around August of this year. So, you know, if you're really trying to stick it to Nintendo, go buy the 3DS between now and August. That'll show 'em!
The 3DS currently sells for $170, down from the $250 price tag it launched with back March of 2011.
Update: We've added context from financial analyst extraordinaires Michael Pachter (of Wedbush Securities) and Jesse Divnich (of EEDAR) just below the break.
Michael Pachter, of Wedbush Securities:
"I don't really understand how far down they will come on the cost curve. Many of the components are commodity components, and presumably they will come down in cost with higher volumes produced, but I don't really have any expertise to offer about how much the cost will decline.
Their guidance was a bit optimistic. They forecast both hardware and software growth for handhelds, in the face of competition from PS Vita and increasing adoption of smart phones and tablets. I don't think that is realistic. Rather, I think that the best case is flat year-over-year unit sales for handheld hardware and software, and the more likely case is a continued decline due to competition. If they don't grow on the handheld side, they are unlikely to make a profit."
Jesse Divnich, of EEDAR:
"Given the slow start of the Nintendo 3DS, requiring aggressive price cutting earlier than anticipated, it shouldn't come as no surprise that the Nintendo 3DS hardware operates at a loss. We do expect, however, that near the back end of calendar 2012, the Nintendo 3DS hardware should at the very least break-even, just in time for the busy holiday season.
The key for any platform sustaining profitability, however, is the software and as long as Nintendo can continue to receive support from third-parties, the royalty gains should offset any losses from the first half of 2012."
