Iwata on reaching his revenue goal, not stepping down
First of all, as you said just now, I mentioned in the announcement of the third quarter financial results at the end of this January that we would aim for the operating profit of 100 billion yen for the fiscal year ending March 31, 2014, on the condition of the exchange rates at that time, which were 90 yen per U.S. dollar and 120 yen per euro. And, in the Financial Results Briefing held on the following day, I said, “this aim is a commitment of the management.” After that, also in the official full-year financial forecast announcement for the fiscal year ending March 31, 2014, at the end of this April, we set forth the same full-year financial forecast. This is because we decided that simply conveying the same forecast was better than saying, “We announced our aim for the operating profit of 100 billion yen on an assumed condition of 90 yen per U.S. dollar and 120 yen per euro, but the exchange rates changed at the end of this April, so we have revised the forecast amount.”
It is true, as you mentioned, that articles stating my “indication of resignation” were published as a result of my using the word “commitment.” However, I have said nothing about resigning from my presidential post. Also, as you highlighted just now, the life span of a console is at least five years, so I also believe that management posts should not be judged on the basis of a single year’s results. On the other hand, I have heard the opinion that Nintendo’s future does not appear promising because it has not been able to adjust to changes in the business environment as a result of its recent business structure changes. In response to this opinion, I thought that if Nintendo itself did not explicitly state it would recover to a certain performance level that is typical of Nintendo, we would not be able to send a clear message to investors and investors wouldn’t know what criteria to use. Unfortunately, the unfavorable period with an exceedingly strong yen was exacerbated by generational change of our platforms, which put immense pressure on our financial condition. In the subject period, Nintendo was not producing many software titles for the hardware platforms which had large installed bases, and the software titles we produced for the launch of the new hardware did not sell in large volumes in their first year (because of the limited installed hardware base of its first year.) The business size of a game platform can become bigger in the second year after launch, even bigger in its third year and eventually become a large business; it cannot be reflected in only a single-year’s financial results. New hardware platform sales have a negative impact on our profits in the beginning and also the yen was abnormally strong. With the influence of these factors, Nintendo experienced an operating loss for the first time since it started to announce consolidated financial results, and it continued for the second consecutive year. Regarding the operating losses for two consecutive years, management took responsibility with salary cuts and no annual bonus, but in spite of these actions, I expect some people wonder how Nintendo’s business performance will change in the future. Fortunately, the yen has weakened a little since the end of last year. And, from our past financial results, many people came to expect Nintendo to consistently earn an operating profit of more than 100 billion yen. Considering these facts, I used the word “commitment” in order to tell you that we are determined to achieve our aim of an operating profit of 100 billion yen.
I have put a lot of energy into thinking about how we can accomplish this performance goal, but comparatively I have not put much effort into considering what we should do if we fail to achieve it. I also believe now is not the time to mention those things concretely. In that sense, I would like you to think that the word “commitment,” which I used before, means we have the intention to put in our best effort and ensure that we achieve this goal. The reports about the possibility that we do fail to achieve it, I understand, are what other people interpreted the word “commitment” to mean. I interpreted your question as one of encouragement. Thank you. - Satoru Iwata
Link
It is true, as you mentioned, that articles stating my “indication of resignation” were published as a result of my using the word “commitment.” However, I have said nothing about resigning from my presidential post. Also, as you highlighted just now, the life span of a console is at least five years, so I also believe that management posts should not be judged on the basis of a single year’s results. On the other hand, I have heard the opinion that Nintendo’s future does not appear promising because it has not been able to adjust to changes in the business environment as a result of its recent business structure changes. In response to this opinion, I thought that if Nintendo itself did not explicitly state it would recover to a certain performance level that is typical of Nintendo, we would not be able to send a clear message to investors and investors wouldn’t know what criteria to use. Unfortunately, the unfavorable period with an exceedingly strong yen was exacerbated by generational change of our platforms, which put immense pressure on our financial condition. In the subject period, Nintendo was not producing many software titles for the hardware platforms which had large installed bases, and the software titles we produced for the launch of the new hardware did not sell in large volumes in their first year (because of the limited installed hardware base of its first year.) The business size of a game platform can become bigger in the second year after launch, even bigger in its third year and eventually become a large business; it cannot be reflected in only a single-year’s financial results. New hardware platform sales have a negative impact on our profits in the beginning and also the yen was abnormally strong. With the influence of these factors, Nintendo experienced an operating loss for the first time since it started to announce consolidated financial results, and it continued for the second consecutive year. Regarding the operating losses for two consecutive years, management took responsibility with salary cuts and no annual bonus, but in spite of these actions, I expect some people wonder how Nintendo’s business performance will change in the future. Fortunately, the yen has weakened a little since the end of last year. And, from our past financial results, many people came to expect Nintendo to consistently earn an operating profit of more than 100 billion yen. Considering these facts, I used the word “commitment” in order to tell you that we are determined to achieve our aim of an operating profit of 100 billion yen.
I have put a lot of energy into thinking about how we can accomplish this performance goal, but comparatively I have not put much effort into considering what we should do if we fail to achieve it. I also believe now is not the time to mention those things concretely. In that sense, I would like you to think that the word “commitment,” which I used before, means we have the intention to put in our best effort and ensure that we achieve this goal. The reports about the possibility that we do fail to achieve it, I understand, are what other people interpreted the word “commitment” to mean. I interpreted your question as one of encouragement. Thank you. - Satoru Iwata
Link
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