Super Mario can't spark Wii U as Nintendo posts another loss

Super Mario upgraded to a Mercedes- Benz in the newest version of his racing game, yet that wasn't enough to keep Nintendo Co.'s Wii U from looking like a lemon.

Sluggish sales of the console triggered Nintendo's third loss in the past four quarters as gamers continue their exodus to smartphones and rival players from Sony Corp. and Microsoft Corp. Nintendo lost 9.9 billion yen ($97 million) in the three months ended June 30. Its American depositary receipts fell.

Mario Kart 8 and a lineup of figurines that interact with games are part of the company's strategy to keep the Wii U competitive against the PlayStation and Xbox. Nintendo also is struggling with an accelerating shift toward mobile gaming and questions from investors about President Satoru Iwata, who is recovering from surgery.

"Nintendo is a very large ship and one or two hits cannot easily move its dial," Amir Anvarzadeh, manager of Japanese equity sales at BGC Partners Inc. in Singapore, said in an e- mail. "Thanks to thousands of free games being offered on smartphone platforms and its home console likely to continue to struggle, we see no recovery prospect for the business."

The company sold just 510,000 Wii U consoles in the first three months and maintained its forecast to sell 3.6 million units this fiscal year. Gamers have bought more PlayStation 4 consoles than Wii U's, even though the Nintendo machine has been out a year longer.

Mario Kart

Nintendo's ADRs slid 4.2 percent to $14.48 at 11:05 a.m. in New York. The company's shares fell 0.6 percent in Tokyo to close at 12,325 yen before the earnings announcement, extending its drop to 12 percent this year.

Sales in the quarter fell to 74.7 billion yen, and the maker of the 3DS handheld player posted an operating loss of 9.5 billion yen. The Kyoto, Japan-based company maintained its forecast for a profit of 20 billion yen and operating profit of 40 billion yen this fiscal year.

"It is difficult for Nintendo to generate a lot of benefit from the Wii U," Hideki Yasuda, a Tokyo-based analyst at Ace Research Institute, said by phone. "Nintendo has to put up with it for several years and needs to wait for the next console."

Mario Kart 8, in which players can drive a Daimler AG Mercedes-Benz, has sold more than 885,000 physical and digital units in the U.S. since its May release.

"Mario Kart sold well but it didn't solve all of Nintendo's problems," said Yasuaki Kogure, chief investment officer at Tokyo's SBI Asset Management Co.

Splatoon, Zelda

Nintendo also sold 820,000 units of the 3DS player in the quarter, down from 1.4 million a year earlier.

Iwata, 54, underwent surgery to remove a bile-duct growth, he said in a June 24 letter to investors. He missed the company's annual shareholder meeting and the E3 trade show in Los Angeles.

Iwata said he had resumed work by e-mail "and by other means."

"Iwata is recovering steadily," Yasuhiro Minagawa, a spokesman for Nintendo, said by phone. "There is no interference with his business as president."

By next year, Nintendo plans to introduce several new titles, including Splatoon, which lets two teams take on roles as squids that morph into people and shoot different-colored ink in timed matches. It will release a new Zelda game, a title called Xenoblade Chronicles X and a Mario racing game that lets users make their own courses.

Nintendo will release two Pokemon games for the 3DS and Captain Toad: Treasure Tracker for the Wii U in time for the holiday shopping season.

The company is also entering the multibillion-dollar collectible-toy market with its Amiibo figurines, which are similar to Activision Blizzard Inc.'s Skylanders. Players can enter a Nintendo character into a game through the Wii U's GamePad tablet.

About 10 Amiibos will be sold for use in Super Smash Bros., with more coming by year-end, Nintendo America President Reggie Fils-Aime said in June.

--With assistance from Sonali Basak in New York and Robert Fenner in Melbourne.

To contact the reporters on this story: Takashi Amano in Tokyo at tamano6bloomberg.net; Cheng Leng in Tokyo at cleng3bloomberg.net To contact the editors responsible for this story: Michael Tighe at mtighe4bloomberg.net Aaron Clark