Nintendo Reports Quarterly Loss, Delays Pokemon Go Plus Release

Pokemon Go Players - Getty - H 2016
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Investors have cheered Nintendo's belated push into mobile gaming, but Pokemon Go was produced by a U.S. company, in which the Japanese gaming giant is a minority investor.

Nintendo on Wednesday reported a net loss of 24.5 billion yen ($232 million) for the latest quarter, as weak demand for its Wii U consoles and unfavorable exchange rates weighed on earnings. 

The Kyoto-based company also confirmed it would delay the release of Pokemon Go Plus, the much-anticipated accessory for the hit augmented reality game Pokemon Go, which was launched in early July just after the latest quarter had ended. Citing the need for software adjustments, Nintendo said the clip-on accessory will be released in September instead of this week.

Since its release just three weeks ago, Pokemon Go has fueled a 50 percent rise in Nintendo's market value. Investors have seen Pokemon Go's global popularity as a positive sign for Nintendo’s belated move into mobile gaming. But as the company pointed out in a brief statement last week, the impact of the game's success on profits will be limited in the near term.

Although Nintendo created the Pokemon franchise, the rights to the characters are held by another Kyoto-based entity called The Pokemon Company. Pokemon Go was developed by U.S. gaming company Niantic, which licensed the IP from The Pokemon Company. Nintendo owns 32 percent of The Pokemon Company and is reported to hold a similarly sized stake in Niantic, which was a Google startup before being spun off (the search giant also remains an investor).

Nintendo posted a 1.2 billion yen profit during the same April-June quarter a year ago and blamed this year's quarterly loss on a stronger yen, which eats into the value of income earned abroad when it is repatriated back to Japan. Nintendo makes more than 70 percent of its sales overseas, meaning currency swings are more important to earnings than a minority stake in a mobile game, no matter how successful.

Nintendo reiterated on Wednesday its outlook for operating profit to climb 37 percent to 45 billion yen for the year ending in March. 

Nintendo has struggled in recent years with disappointing sales of its Wii U console, as casual gamers migrated to smartphones and tablets. The company had been reluctant to license its popular characters for games on other devices, but Pokemon Go's viral success has set high hopes for the company's ability to generate profits by further tapping its valuable library of characters.