Nintendo Q2 profit hits 8-year high, banks on Pokemon-powered holiday season

By Sam Nussey

OSAKA (Reuters) - Japan's Nintendo said sales of its Switch consoles and related games powered its second-quarter profit to an eight-year high, and it is banking on upcoming games in its popular franchises such as Pokemon to drive key holiday-season sales.

The Kyoto-based games maker's July-September operating profit jumped 30 percent to 30.9 billion yen ($274.11 million) on the back of Switch hardware and games sales, it said on Tuesday.

That was Nintendo's highest quarterly sales since the second quarter of the year ending March 2011 but fell shy of the 36.6 billion yen average of estimates of seven analysts, according to Refinitiv data.

Nintendo said it sold 5.07 million of its Switch consoles over April-September, and maintained its sales forecast for the year ending March at 20 million consoles.

President Shuntaro Furukawa, who assumed the role in June, told an earnings conference the sales target was a challenge but expressed confidence it would be reached.

Nintendo's earnings were supported by the 42 million Switch games sold in April-September, versus 22 million in the same period a year earlier, with upcoming titles generating a buzz among games fans including next month's Pokemon: Let's Go titles and December's Super Smash Bros. Ultimate.

The company is hoping for success with those titles featuring much-loved Nintendo characters to drive Switch sales towards its annual target as it heads into the holiday shopping season.

The power of strong character franchises was evident at Sony Corp's earnings on Tuesday, where the success of action game Marvel's Spider-Man helped offset declining PlayStation 4 hardware sales.

Nintendo is also working to turn mobile gaming into an additional revenue stream, releasing its latest title, Dragalia Lost, last month. Within weeks, the president of co-developer CyberAgent Inc hailed the game as its "number one hit" over that time frame.

CyberAgent's previous hits include Granblue Fantasy. Nintendo's Furukawa said the focus was on building a loyal Dragalia Lost user base over the longer term.

The partnership is the latest by the secretive games maker, whose mobile titles such as Mario Run and Animal Crossing: Pocket Camp have not been as successful as the augmented-reality monster catching game Pokemon Go from partner Niantic Inc.

Nintendo has also been slow in offering online services for the Switch - which potentially offers a predictable revenue stream from a subscriber base - with Nintendo Switch Online launching only last month.

Furukawa, who at 46 is young by Japanese corporate standards, said the service had got off to a good start but declined to provide financial details. Rival Sony's profits were bolstered by its PlayStation Plus subscriber base, which is continuing to grow.

Nintendo's shares hit a 10-year high in January but have since fallen around 30 percent amid broader weakness in technology-related stocks. They closed up 1.7 percent on Tuesday ahead of the earnings release, broadly in line with the benchmark share price index.

($1 = 112.7300 yen)

(Reporting by Sam Nussey and Yoshiyuki Osada; Editing by Christopher Cushing and Muralikumar Anantharaman)