Nintendo

 Nintendo Co. Ltd. of Kyoto, Japan, parent of Redmond-based Nintendo of America Inc., Friday reported sharply increased consolidated financial results for its fifth consecutive fiscal year reporting period.

Net sales were $1,505,993 (a) for its current fiscal year ended Aug. 31. This is contrasted with net sales of $1,070,925 for the like period last year, representing a 41 percent surge in sales over FY 87.

Net income was $223,029,629, a 19 percent increase over net income of $186.6 million for the like period in 1987. Earnings per share were $3.83 compared with $3.52.

Operating income was $358,607,407 vs. $339,022,222 for the prior fiscal year, a 6 percent increase.

The consolidated results cover Nintendo Co. Ltd. and its largest subsidiary -- Nintendo of America Inc.

Nintendo of America President Minoru Arakawa attributed the significant increase in net sales to a U.S. home video game marketplace that has grown more than 100 percent in the last year.

Arakawa said 1988 U.S. sales of Nintendo Entertainment System "... have continually grown by leaps and bounds." He said Nintendo's market research shows a consumer demand for 8.4 million hardware units while Nintendo will only be able to supply the market with 7 million units. Much of the reason for the hardware shortfall can be attributed to Nintendo's ever-increasing share of market.

The company started out the year with approximately a 70 percent share-of-market. The most recent Toy Retailers Sales Tracking Service study shows Nintendo with an 83 percent market share.

"Meanwhile sales of software have continued to grow at a phenomenal pace," Arakawa said. "We have three titles that have sold over two million units -- 'Super Mario Bros.,"The Legend of Zelda,' and 'Mike Tyson's Punch-Out!!' -- and the latter two have only been on the market since the second half of 1987," he said.

Both "Super Mario Bros." and "The Legend of Zelda" have spawned sequels which will be on the market in the final quarter of 1988.

Arakawa said, "...as Nintendo's market penetration of its basic hardware increases (currently about 12 percent of U.S. households), sales of peripheral components, and to a greater degree, sales of software and royalties from software licensees will contribute a larger share of profits than in the past."

This contribution is already evident in the net sales figures reported for FY88 Arakawa said. He cited the newly introduced Power Set with its Power Pad peripheral, which "...is flying off the shelf," and retailer orders for two games which work with the interactive Power Pad -- "Super Team Games" and "Dance Aerobics" --as examples.

Using these Power Pad software titles as examples, Arakawa asserted that software sales hold the key to both longevity and profitability for the home video game industry.

"These titles expand the demographics beyond our traditional base of 8- to 15-year-old boys. Where 80 percent of this industry was comprised of members of this group in the industry's infancy during the early 1980s, today that group only makes up 60 percent of our user base," said Arakawa.

"Now, 15 percent (and growing dramatically), of our users fall into the 25 - 44-year-old age bracket," he said.

"We attribute that growth, and the results of recent market research which shows that females now account for more than 20 percent of our primary players -- up significantly from one year ago -- to the increased play value of traditional sports and adventure games, and the offering of adult-oriented titles such as "Wheel of Fortune," "Jeopardy," and "Anticipation," he said.

Concluding, Arakawa said that, based on the strength of software sales and solid hardware sales, Nintendo projects industry sales of approximately $3.4 billion in 1989 -- comprised of 8 million hardware units and 55 million software units.

Nintendo Co. Ltd. is the world's largest manufacturer of home video games, and Nintendo of America Inc. is a wholly owned subsidiary which markets the leading home video game system in the United States --holding over a 75 percent market share.