Nintendo Executives Accept Pay Cuts Amid Disappointing Sales Results

The executives of Nintendo Co., Ltd (OTCMKTS:NTDOY) (TYO:7974) announced their decision to accept pay cuts after the company reported disappointing sales results for its Wii U game consoles, Nintendo 3DS devices, and game software.

Five month pay cut for top execs at Nintendo

The Japanese game developers’ president, senior managing director, managing director, and directors agreed to cut their compensation for five months starting February. Satoru Iwata, president of Nintendo Co., Ltd (OTCMKTS:NTDOY) (TYO:7974) will take a 50% pay cut. Two of the company’s representative directors and its game creator, Shigeru Miyamoto will take a 30% pay cut.

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The seven board members of Nintendo Co., Ltd (OTCMKTS:NTDOY) (TYO:7974) agreed to reduce their compensation by 20%.

Early this month, Iwata apologized to the shareholders of the company for failing to fulfill its promise to regain its profitability. He said, “We failed to reach our target for hardware sales during the year-end, when revenues are the highest.” Despite the failure, Iwata said there will be no major management shake up and he will remain in his position.

Nintendo financial results

The Japanese games developer reported that its net income for the nine month ended December 2013 declined by 30% to ¥10.19 billion yen and its net sales were ¥499.12 million, down by 8%. The company posted ¥55.57 million ordinary income and ¥79.73 earnings per share

During the same period in 2012, the company delivered ¥14.54 billion net income, ¥543.03 million sales, and ¥113.75 earnings per share.

Nintendo Co., Ltd (OTCMKTS:NTDOY) (TYO:7974) sold 11.65 million Nintendo 3DS hardware units  and 57.25 million Nintendo 3DS software units globally. The company said its global sales growth was limited despite its popularity in the United States.

“The Wii U hardware still has a negative impact on Nintendo’s profits owing mainly to its markdown in the United States and Europe and sales of software, which has high profit margins, did not grow sufficiently…” according to the company.

Nintendo Financial outlook

For the fiscal year ending March 31, 2014, the Japanese games developer estimated that it will its net sales will decline 7% to ¥590 million yen and incur ¥25 million net losses, and ¥35 million operating losses. Its ordinary income will decline by 52.3% to ¥5 million.

Nintendo Co., Ltd (OTCMKTS:NTDOY) (TYO:7974) explained that the anticipated sales decline was due to seasonal factors and increase of yen from the end of the third quarter to the end of the fiscal year, which would to a reduced exchange gains and ordinary income. The expected net loss was primarily due to the reversal of deferred tax assets in the third quarter related to losses carried over from the previous fiscal years particularly in the United States.