As the Japanese giants announce staggering losses, we find the truth behind the numbers

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Here's the thing: investors are idiots. Fickle, bandwagon-chasing dolts. During a tense investor briefing, one owner of Nintendo stock broke up the demands for the company to release Mario games on iPhone to say he didn't really have any interest in games. He'd just bought the stock because they were based in his birthplace of Kyoto and he liked the name Nintendo. That's what Nintendo were up against. Investors don't really have a clue - they're high-stakes, professional gamblers, who chase after the next big thing and get it wrong as often as they get it right.


That 20 billion loss needs to be put in context, too: Nintendo's rivals lose money all the time. Much was made about the fact that, after the price drop, 3DS would be sold at a loss; Nintendo were going to lose money on every 3DS sold. But Microsoft and Sony have built their videogame businesses on loss-making hardware. We can never really tell when Sony make money from PlayStation - they have fingers in too many pies for us to find out specifics - but we do know that the Xbox project was almost seven years old before Microsoft's Entertainment & Devices division made an annual profit. The Xbox 360 'red ring of death' fiasco alone cost Microsoft about a billion dollars - six times the loss Nintendo have told us to expect.

Microsoft and Sony would tell you that they can afford to take a loss on hardware because they also sell PC software, phones, TVs, laptops and so on; Nintendo only have games, and if they can't sell consoles or games any more, they're in trouble. It's a fair point, so maybe we should look at some other companies whose sole business is games: publishers. Electronic Arts? Fifteen losses in the last 20 quarters. Activision? In the last three months of 2010 they set sales records with Call Of Duty: Black Ops and World Of Warcraft: Cataclysm, but took a loss of $233 million and laid off 500 staff.



Still, a loss is a loss, and the fact that Nintendo have never done this before means they must be in trouble, right? Wrong. Buried in reams of financial data is the revelation that Nintendo have 812.8 billion (£6.7 billion) in the bank - enough for it to take a 20 billion loss every year until 2052.

Then there's almost 469 billion held in premises, equipment and investments. When that runs out - we're in the year 2075 by this point - they've got some of the most valuable intellectual property in gaming to sell off before the company goes out of business.

In any case, much has changed since last autumn. Back then, Iwata pleaded for investors' patience, saying Nintendo were confident of a strong close to the year. And so it's proven: 3DS has been the best-selling hardware in Japan every week since the price cut in August, and more than four million systems have now been sold in both Japan and the US. More than two million copies of Super Mario 3D Land and Mario Kart 7 have been sold worldwide. There's life left in the Wii, too, with over half a million units sold on America's baffling annual retail splurge, Black Friday, and Skyward Sword becoming the 45th Wii game to sell a million copies in the States.


It might not be enough - exchange rates are still a problem, and without knowing the size of the loss on 3DS hardware it's impossible to predict whether Nintendo can defy expectations and turn a profit. We'll find out in April, when their full-year results will be revealed. 2012 will be a whole new challenge - Nintendo need Wii U to succeed immediately, and they must sustain 3DS's momentum - but the last few months have shown that they still know what they're doing, despite what crazy investors think.


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