Wii, DS drive Nintendo year-end profits above $1 billion

Redmond (WA) - The Wii and the DS Lite were at the forefront of the company’s escalating sales. After its flailing position last year with the dying Gamecube and stagnant handheld sales, the company rebounded in 2006 to increase sales by more than 70% over the previous year.

Nintendo overview of features ...

Nintendo posted its results for the first nine months of its current fiscal year, from April through December. During that period, Nintendo’s global sales totaled $5.9 billion, a 73% year-to-year increase from 2005’s $3.4 billion. In terms of actual profit, for the previous 9-month period in 2006, Nintendo broke the $1 billion mark. Last year it only recorded about $750 million during the same period.

The higher sales figures are primarily attributable to the Wii, which launched in November and sold over two million units in as many months. Nintendo previously said that it actually is making a minimal profit from each Wii that it sells, a radically different business model than Sony and Microsoft. The two competitors price their high-end consoles below the bill of materials, to grow their userbase and make up the deficit with game sales.

The popularity of the DS Lite during the holiday season also came as a bit of a surprise, as stores began to run out of stock of the system. Blockbuster first-party titles like Brain Age, Nintendogs, and New Super Mario Bros also helped bolster Nintendo’s DS sales. Zelda : Twilight Princess for the Wii was Nintendo’s other big software title for the final two months of the year.

It was mostly all good news for Nintendo as it rounded out the end of 2006. The only real problem it faced was with the Wii strap, which was allegedly not manufactured strong enough for the extreme game play the console can incite, forcing Nintendo to introduce a voluntary recall for millions of the remote straps.

The Wii strap recall is predicted to cost Nintendo somewhere around $8 million, only part of which affected the 2006 profits, as many Wii owners have yet to replace their original Wii straps. Nintendo also had trouble getting enough Wiis shipped to retailers before Christmas, missing out on the potential for significantly more pre-2007 sales. To date, it still has not been able to make enough consoles to fulfill the early adopter demand.

Nintendo also said that it reached its originally planned goal of manufacturing four million consoles by the end of the year, though some of those are just now actually finding their way to store shelves. The company stated it is still on track to have shipped six million units by March 31.