The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.
Nintendo Q3 EPS beat. Revenue was ¥342 billion, compared with our estimate of ¥345 billion and the consensus estimate of ¥414 billion. Software sales were above our expectations, while hardware sales were below. EPS was ¥333, compared with our estimate of ¥73 and the consensus estimate of ¥186. EPS exceeded our expectations from cost control and large foreign exchange gains.
FY:13 top-line guidance lowered to a more realistic level. Nintendo (7974.JP) decreased guidance for revenue to ¥670 billion (only 3% y-o-y growth) from ¥810 billion and for operating income to a loss of ¥20 billion from a profit of ¥20 billion, but increased EPS guidance to ¥109 from ¥47. The poor Wii U debut likely contributed to lowering of expectations.
Units guidance was lowered across the board, with the steepest cuts to Wii U hardware and software. Last quarter, we viewed Nintendo’s FY:13 Wii U hardware guidance of 5.5 million units as disappointing, while we viewed its software guidance of 24 million units (implying an attach rate of over four) as unrealistic. Both figures ultimately proved to be unrealistic, as hardware guidance now stands at 4 million units, and software guidance at…