Japan's Nintendo Co. on Tuesday raised its 2006/07 net profit forecast by 20.5 percent, beating market expectations, thanks to strong sales of its DS hand-held video game player and a weaker-than-expected yen.
The company lifted its sales forecast for the Nintendo DS device by 18 percent and said the revision also includes its latest estimates for its new Wii game console, which is scheduled to go on sale in the United States in November.
Nintendo has seen red-hot demand for the DS and smaller DS Lite players and software with its innovative hit games like "Brain Training for Adults" and "Nintendogs" as its strategy to broaden the game-playing population to women and senior citizens by offering easy-to-play games paid off.
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"We had expected better earnings than the company had forecast for the first half, but it was surprising to see how much it raised its full-year forecast, especially the sales outlook," Nomura Securities senior analyst Yuta Sakurai said.
"Nintendo had expected DS sales to slow once its Wii and Sony's (SNE) PlayStation 3 game consoles hit the market, but we see no sign of that ... and it looks like the company shifted its view and now expects DS sales to remain strong through the year-end," he said.
The company forecast a group net profit of 100 billion yen ($850 million) in the year ending March 31, up from its earlier estimate of 83 billion yen. It reported a profit of 98.4 billion last year.
The new target beats the market consensus for a net profit of 84.6 billion yen, according to a poll by Reuters Estimates.
Nintendo raised its sales estimate by 15.6 percent to 740 billion yen, and operating profit target by 16 percent to 145 billion yen. The company based the new earnings estimates on an exchange rate of 115 yen to the dollar, and 143 yen to the euro.
Nintendo will also pay a 400 yen full-year dividend, up from the 330 yen it planned earlier, and the actual 390 yen in 2005/06. The company will pay 70 yen in the first half, and 330 yen in the second half for the current business year.
Nintendo, the third-ranked game console maker, is hoping its new Wii console will lure customers away from new gadgets made by its bigger rivals Microsoft Corp. (MSFT) and Sony Corp.
While Microsoft and Sony boast super high-tech consoles priced significantly higher than previous models, Nintendo is stealing some of their thunder by keeping its price low and offering a new, game-changing controller.
Nintendo, which trails its rivals going into this holiday season's console war but is the only of the three to say it will turn a profit on its machines from the start, has won praise for its gutsy and contrarian tactics as it battles for ground in the $30 billion video game market.
"There will be so many people who want the console that it will be almost impossible to actually get them at the beginning," Nomura's Sakurai said.
Nintendo will launch the Wii console, featuring a motion-sensing controller that operates like a television remote control and lets players simulate swinging a bat or tennis racquet, in the United States on November 19 for about $250 and in Japan on December 2 for 25,000 yen.
Microsoft'sXbox 360 has been available since last year and Sony's PlayStation 3 is slated for a November 17 launch in North America.
Sony last month cut the console price by 20 percent in Japan to 49,980 yen ($430) to attract more customers.
Nintendo also expects rising sales of its DS game players and titles, whose brisk sales in 2005 helped the Japanese game market register growth for the first time in five years.
Nintendo raised its sales forecast for its DS game device to 20 million units from 17 million for the current year, and said it expects sales of DS games to total 82 million units, up 9 percent from its previous target.
Nintendo also increased its estimate for sales of its Game Boy Advance game machine by 32 percent to 3.3 million units.
For the first half of the business year, the company almost doubled its net profit estimate to 50 billion yen, against previous forecast of 27 billion yen. That compares with a profit of 36.6 billion yen a year earlier.
Nintendo's first-half sales probably totaled 290 billion yen, compared with 176 billion yen a year ago, the company said.
Before the announcement, shares in Nintendo closed down 2.3 percent at 23,820 yen, while the benchmark Nikkei average ended down 0.08 percent.