Market Overview

Reality Check for Nintendo Investors: iPhone Development is Never Going to Happen, Would Kill the Stock


Small short-term gains, massive long-term losses.

Bloomberg is reporting that Nintendo investors are increasingly unhappy with Nintendo, a company that is determined to stick to its tried-and-true business model of making games exclusively for its own devices.

This strategy is nothing new; Nintendo has been this way since it entered the game industry in the ‘80s. This strategy has been very effective for the company, and contrary to popular belief, there is absolutely nothing wrong with it.

Bloomberg quotes MF Global FXA Securities Ltd., which wrote in a sales note, “They just don't get it. Sell the stock, because a management once feted for creative out-of-box thinking have just shown how behind the times they are.”

Really, guys? Nintendo was an out-of-the-box thinker? When was that, exactly? During the ‘90s when it stuck by overpriced game cartridges while Sony (NYSE: SNE) and Sega used a cheaper and more efficient medium? Was it during the Nintendo 64 era when every game was delayed several months, killing both sales and interest in Nintendo products? Was it during the GameCube era when Nintendo lost third-party support, lost consumers to Xbox and PlayStation 2, and all but destroyed the Nintendo brand?

Maybe MF Global FXA Securities is referring to the overload of Pokemon rehashes that the company releases. They were very “out-of-the-box.”

In all seriousness, Nintendo is and always has been one of the most stubborn corporations in the world. That stubbornness has served it well, but it has also cost the game maker billions of dollars. During the ‘90s, nobody realized this because Nintendo continued to post huge profits – all thanks the Game Boy and Pokemon. But if Nintendo 64 hadn't been a disappointment, and if GameCube hadn't flopped, Nintendo's earnings could have doubled.

This generation, Nintendo no longer has a Game Boy – or Pokemon – to fall back on. The Nintendo 3DS could have been its fallback system since, all things likely, Wii U will not do very well. But Nintendo killed the 3DS with a crappy launch lineup. I've been over this a million times. If you're a Nintendo investor, you need to realize how the company works. If you want to sell, then by all means – sell the stock already! But don't expect the Mario maker to change its strategy and become a dime-a-dozen, 99-cent iPhone developer.

By doing so, Nintendo would no longer make a mint selling hardware (but Apple (NASDAQ: AAPL) surely would). Nintendo would also have to lower the MSRP of its games, which would diminish the company's profits, etc., etc. We've been over this before. You're either a Nintendo investor or someone who's very interested in the company, so you have done your research, right?

If not, it's time to read up.

Follow me @LouisBedigian

Posted-In: Android Apple eShop Google iOS iPad iPhoneTech Best of Benzinga


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