Nintendo Needs an Extra Life

Nintendo (OTC: NTDOY) is stuck in the past.

The iconic video game maker has long relied on milking its classic franchises for decades, reinventing them over and over again in an attempt to breathe new life into characters that date back to the '80s. Today, the company announced its newest batch of old faces coming to its troubled 3DS.

The roster includes familiar names in new titles like Super Mario 3D Land and Kid Icarus. On top of that, the company also desperately seeks to entice female gamers with a pink version of the handheld device alongside female-targeted titles like Girls' RPG: Cinderella Life. Nintendo President Satoru Iwata called the lineup for the holidays "stronger than any in the past."

Unfortunately, investors are not impressed as shares are down 5% on the announcements. Even before today's drop, shares were already down 42% this year alone. Companies need to innovate and adapt as consumers and technology evolves, yet Nintendo remains fastened to its old ways: incremental hardware improvements and rehashed franchise titles.

This explains why first-quarter revenue fell by a disastrous 50% while gross profit plunged a terrifying 84%. Amazingly, the company's net loss hardly changed from last year because of the absence of foreign exchange losses incurred last year.

The company continues to ignore the potential in explosive mobile gaming platforms like Apple (Nasdaq: AAPL  ) iOS and Google (Nasdaq: GOOG  ) Android and the trend toward social gaming that Zynga is riding. Game maker Activision Blizzard (Nasdaq: ATVI  ) is joining the party by including social networking elements in Call of Duty Elite later this year.

Nintendo has a lot riding on the 3DS, and the recent price cuts aren't an encouraging sign for the company. Iwata has been Nintendo's president since 2002, so he's no newbie to the industry. If he continues to stick to his guns and only allow the company to develop for its own struggling hardware, then it could be "game over" for investors.

 

Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Google, Apple, and Activision Blizzard. The Fool owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Activision Blizzard, Google, Apple, and Nintendo. Motley Fool newsletter services have recommended creating a synthetic long position in Activision Blizzard. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On September 14, 2011, at 9:59 PM, wazaus wrote:

    Milking is exactly what you call 4 or 5 Call of Dutys in one generation, or 4 Assassins Creeds in one generation, or 3 Uncharted's in 5 years.

    Remember Guitar Hero? Yeah, it was milked out of existence.

    By comparison, there were only 3 Mario titles on Wii, and one was 2D. On DS there was only one Mario Kart and only one original Mario title (both sold over 20 million copies each).

    Do trading press even think for themselves?

    Monster Hunter and Dragon Quest, the two best selling franchises in the last 10 years in Japan, are BOTH on the 3DS now.

    This coup (completely ignored by passive game industry analysts. note- MH had supposedly been the one game series that allowed the PSP to gain any market in Japan in the last gen.) has not only taken Sony's Vita, their next handheld, by surprise, but it has guaranteed a huge segment of the japanese market will buy their system instead.

    This is at a time when Vita is launching only weeks after a new MH game launches on 3DS.

  • Report this Comment On September 15, 2011, at 12:23 AM, Risky88 wrote:

    Nintendo is getting left in the past like sony and microsoft were when they first came out against the wii. Once the titans caught on, especially since they have about 10x the features of the puny wii, they have no chance. Everyone has played Mario etc. They may change it time to time, same story over and over. COD got big becuase it was something new and exactly what gamers wanted. That will change also eventually. Fads come and go, so do companies. The pendellum swings whatever way it feels like. Apple reinvented itself, so did nintendo. Nintendo can do it again.

    But who knows Apple may be in Rimms position in ten years.

    If this was 2001 and told you that in 10 years Rimm would be on the verge of extinction in 10 years, you would have proabably laughed.

    Listen to consumers, then do what they actually tell you to do

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