IR Information

Financial Results Briefing for the 67th Fiscal Term Ended March 2007
Q & A
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Q 21   You said that you would write many scenarios before coming up with the financial forecasts. Were the results of the previous term (ending March 2007) in line with the scenario you had originally prepared?
A 21


  Approximately one year ago, when we made the annual financial announcement, we set our original estimates, which have ended up being too small against the actual results. Around that time, we had a good feel for the Japanese gaming population expansion, but DS Lite had yet to hit the overseas markets. We could not tell how the launch of DS Lite could accelerate DS hardware sales in the overseas markets, especially in the Americas, which is the biggest video game market. In other words, between the best- and worst-case scenarios, we had to anticipate a wide range of discrepancies in the U.S. Because we had to revise our forecasts four times, it is inevitable that we are criticized for the lack of making good forecasts. However, in each occasion, there were things we were sure of and things we could not be certain about. We were trying to make the best guesses in order to make the forecasts. However, the result was, our efforts have borne more fruits than we could anticipate. As for Wii software too, we feel that more people than we had expected appreciated our offers.

Q 22   You were already so close to 1 trillion yen sales. Aren't you concerned about the so-called "big company disease"?
A 22


  Nintendo has just about 1,500 employees in Japan. Even when we look at our global operations, we just have little more than 3,000 people. I think that Nintendo's value lies in the fact that this small number of people is achieving these numbers, rather than the sheer number themselves or the sharp increase in our sales and profits. With this small number of people involved, it is hard to suffer from the "disease" that gigantic organizations are somehow susceptible to. How to prevent "big company disease" for the really big company with 100,000 employees must be fundamentally different from when people talk about the threat of similar symptoms in a company with 1,500 people.

  For your information, ever since I became the president of the company, I have been paying special attention to facilitate partnership between our hardware teams and software teams and cooperation between development divisions and production divisions and marketing divisions. Gigantic corporations which are susceptible to big company disease cannot increase their annual sales by 90% in a year in the first place. In that sense, I believe Nintendo is operating just as it should be right now. However, we have to recognize that a 90% increase in sales is not the fruit of our own ability. A sales increase of this magnitude is the result of so many different factors. We did make efforts and our abilities have contributed to the sales increase, but there were so many other elements working in favor for us. I am not concerned about the possibility of big company disease, but I would like to be always considerate enough so that we would never be conceited nor be unvigilant.

Q 23   A big home electric shop I know is selling 1,000 DS hardware at the end of every week, and each one of them is snatched up instantaneously. On the other hand, I know that some of the small retail shops in town complains that they never receive supplies. What do you think about this situation?
A 23


  Please note that Nintendo is dealing with wholesalers. We sell our products to wholesalers, and they make allocations based upon their own decisions. Usually, Nintendo and wholesalers decide our allocations based upon actual transactions made in the past. In terms of the current situation that any DS and Wii hardware can be sold through in a relatively short time period at the outlets, every wholesaler demands more allocations. However, basically, between Nintendo and the wholesalers, we are agreeing to allocations based upon past transactions. On the other hand, there are some small retail outlets that have been kindly dealing with Nintendo products for a very, very long time and which do not belong to any big retail franchise and, for these specific retailers, some special allocations are being made. So, if our products are not allocated to some specific retailers, unfortunately, it is the issue between the retailer and the wholesalers, which Nintendo cannot control. Please note, however, that our basic policy is to realize as fair allocation as possible based upon the past transactions and their willingness to sell Nintendo products.

Q 24   You mentioned some negative observations of past DS sales in North America. How do you see the current condition?
A 24


  One year ago, my observation was, "the delay was obvious." However, today's observation is, "the change is starting to take place." For example, according to NPD research company in the U.S., more than 500,000 DS hardware were sold in March alone. Selling any hardware more than 500,000 in March in the U.S. is not a bad figure at all, and we should not be pessimistic. On the other hand, Japan, which traditionally has only half the market size of the Americas, as a result of successfully expanding the gaming population, was able to sell 600,000 or 700,000 DS hardware in months which were not in the holiday sales season. From such a perspective, it can be said that the U.S. is merely duplicating the good sales which have been achieved in traditional game business or before the actual gaming population expansion starts. Having said that, however, the sales in the Americas are far better than one year ago, so it is improving.

  We are also noticing what the U.S. people often call "early signs." In many different places, something unprecedented is actually taking place in the U.S. People who would never talk about video games are actually discussing DS and Wii or actually touching them. These are the early symptoms for the market to change. So, we have the early signs. But the real market change has not taken place yet. When the change has occurred, the Japanese market doubled its size. I think that same thing can happen in the U.S. We have not gone that far yet but we are listening to the earth rumbling. We have come to that stage. That is why I am saying, "we really want to make it happen," and "If we can make the change to happen, Nintendo has the huge potential to make a great leap in Americas." And, because we would like to surely take this great chance, I said, "we would like to pay special attention to the U.S. market this year."

Q 25   Then, you will have to do your best on Wii while you sell more of DS. How do you balance between the two?
A 25


  The situations are little bit different between Japan and the U.S. In Japan, we could focus upon Wii marketing only after we were able to observe the DS' momentum in the local market. In the Americas, we have to make simultaneous progress for both. To make the progress on both of these products, we will need to make tweaks. Specifically, we will need to identify the different focuses for them. In order to expand the audiences, DS has the advantage because DS play is not confined to being in front of a TV set, so word of mouth can be more easily encouraged. In the case of Wii, we need to invite potential customers to a place where both a TV set and Wii are located. DS has more opportunity to spread its appeal as people can bring DS with them to show it to other people wherever they go by saying, "I am enjoying this now" or "this is fun." Accordingly, gaming population expansion efforts must be crafted by putting DS as the center player of it. On the other hand, for Wii as the video game machine with brand-new entertainment proposals, the Americas are a big enough market for home console video games. We will continue our steady efforts to spread Wii in this healthy market with the momentum for home console video games. And, we would like to leverage such opportunities as home parties, where we can invite newcomers to play Wii.

Q 26   Will you be able to make Wii the best-selling home console video game hardware in the U.S.?
A 26


  All I can say is, we would like to make efforts to make that happen. It is the analysts' job to predict whether or not we can make it, isn't it? (laugh)

Q 27   Can we interpret that you are aiming to make that happen?
A 27


  Of course. We want as many people around the world as possible to accept our commodities, and we would like to put smiles on as many people as possible.

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