Nintendo will split its stock into 10 from October, potentially propping up the shares as the Mario creator struggles to revitalize a five-year-old Switch console and overcome a global chip shortage.
The Kyoto-based company projected full-year operating income below analysts' estimates after reporting a mere 0.6% rise in profit for the March quarter. It's expecting to sell 21 million Switch devices this year, shy of the 21.7 million anticipated.
Nintendo's forecasts are often conservative, but the disappointing set of numbers illustrate the Switch's slowing momentum. The hybrid console, updated with an OLED model last year, was also constrained during the period by issues with component supplies and logistics. Even when production and deliveries return to normal, the aging console will struggle to maintain its previous sales pace, said Toyo Securities senior analyst Hideki Yasuda.
"The stock split plan would be obviously a boost," said Yasuo Sakuma, chief investment officer at Libra Investments. "I'm just surprised that Nintendo announced a stock-split after having resisted it for such a long time."
Sony, whose flagship PlayStation 5 game console also suffered supply constraints from component shortages and logistics disruptions, reported disappointing results Tuesday. Nintendo President Shuntaro Furukawa told reporters he saw no end to the semiconductor crunch, which has constrained global production of cars and smartphones.
"The outlook on chip shortages remains unclear. We do not see an end to this situation," he said.
Nintendo's operating profit inched higher to $922 million in the quarter ended March, with sales growing 6%. The company projected full-year operating income of $3.8 billion, versus projections for $4.7 billion.
Nintendo underperformed in spite of the yen's weakening against the dollar and euro. Roughly four-fifths of the company's revenue comes from overseas and its software sales, whose production costs are mostly yen-denominated, benefited from the home currency's fall. During the quarter, it also recorded strong sales of Pokemon Legends: Arceus, a game that's become the fastest-selling title in the long-running franchise, according to its publisher.
Nintendo plans a string of high-profile game releases from its in-house development studios this year, including additions to the Pokemon, Splatoon and Xenoblade Chronicles franchises. Furukawa has argued that hardware sales can be sustained through the release of attractive new titles.
On Tuesday, the Nintendo president declined to comment when asked during a media briefing about when his company might unveil the next iteration of its marquee console.
"The only option for Nintendo to prop up the hardware's sales momentum is to release upgraded hardware," Yasuda said.