Is Apple the Next Nintendo?

I'm about to compare Apple (NASDAQ: AAPL  ) with Nintendo (NASDAQOTH: NTDOY  ) , and it's not going to be pretty.

See, I'm not going to pit the world's most valuable tech company against the gaming giant in its prime. That would be too easy. I'm matching up Apple to the tired and out-of-touch Nintendo of today.

You're going to hate me. You're probably going to disagree with me. That's fine, though. Validation is cheap and isn't necessarily valuable to you as an investor.

Wii will rock you
There was a time when Nintendo turned heads. It revolutionized the portable market with its GameBoy, just as Apple did with its iPod. It set the bar with the 8-bit console, only to raise it with every update to the platform. You see that happen with every new generation of Apple products as well.

But there comes a point in time when that simply isn't enough. The Wii was originally the console of choice when it was introduced. It overcame the giggles behind the name -- just as Apple did with the iPad -- to set the industry standard. The Xbox's high-tech Kinect just doesn't happen if Wii's motion-based controller didn't get gamers off the couch.

Wii lacked the specs of its competition, just as Apple's smartphone lacks many of the traits of the best-of-breed Android devices. The iPhone 5 doesn't have the NFC chips or the larger screens found in some of the devices running Google's (NASDAQ: GOOGL  ) open-source operating system. Its camera isn't as good as shutterbugs will find in Nokia's Windows-fueled Lumia 920.

None of that mattered at first for Apple, just as it wasn't a problem initially at Nintendo. The Wii wasn't graphically as powerful as the Xbox and PS3. It didn't play movies on optical discs, while the other two systems became home-theater centerpieces. But that didn't make any difference, as the gimmick of motion-based controllers and the collection of proprietary games had players flocking to Nintendo.

Apple sauce
What sets iOS apart from Android these days? It sure isn't the App Store anymore. Google's platform caught up with Apple late last year, when it hit 700,000 apps, and it's widely expected to beat Apple to the milestone of a million apps later this year.

Nintendo has its proprietary games that play to its advantages. You can't play Mario or Zelda anywhere else, just as Apple has its own signature applications. But just as Microsoft (NASDAQ: MSFT  ) eventually raised the bar with Kinect to offset the motion-based advantage that Nintendo originally had, there's a perfectly capable Siri substitute for Android devices. Just as developers of violent and mature games were dissuaded from supporting Nintendo, Apple's draconian App Store ways now have some developers backing Android first.

The pie is still growing, but Nintendo consoles and Apple smartphones have been losing market share. However, the Wii has always had the advantage of being cheaper than rival consoles. The same thing obviously doesn't apply to Apple's iPhone, especially overseas, where wireless carriers aren't open to paying Apple hundreds of dollars to subsidize a single handset.

The iPhone 5's stateside price of $199 with a two-year wireless contract is reasonable. Now head out to Europe or Asia, where buyers have to shell out at least $700 to $800 for a new iPhone. Is it any wonder why Android is gaining global market share?

The ghost of Apple's future
One thing that set Nintendo apart against its console-making rivals is that it wasn't willing to take a hit on hardware. Microsoft didn't have a problem selling the Xbox at a loss, knowing that it could make up the difference in software royalties and digital downloads. The same could be said about the PS3.

Nintendo didn't have to play that game. Its inferior spec sheet and killer brand allowed it to sell the Wii at a profit, but that changed with November's debut of the Wii U. The fallen gaming rock star confirmed that it has joined its peers in subsidizing hardware late last year.

Isn't this where Apple's heading? It's not necessary to sell iPhones, iPads, and iPods at a loss, though Apple could make up the difference through its lucrative ecosystem if it ever had to. Amazon.com (NASDAQ: AMZN  ) is trying to do exactly that by offering its Kindle products at cutthroat prices.

Things aren't that bad for Apple. However, many analysts have been talking down the company's near-term prospects, assuming that margins will be pressured in the future. How can they not? Android has closed the gap, and it's available at substantially lower price points throughout the world, given the many hardware makers and open-source nature of the platform.

Android is too big of a disruptor, just as Apple's App Store was too big of a disruptor for Nintendo's 3DS.

So is Apple the next Nintendo?

That's not a compliment anymore. 

There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been handsomely rewarded, with more than 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and, more importantly, your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


Read/Post Comments (16) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 06, 2013, at 9:38 AM, aappllee wrote:

    Apples and oranges. You have given way too much importance to a game company. A game company that is poorly run.failed on so many metrics that its not really revelent to discuss here. Will apple be another Sony. That's the question. And again another poorly managed company.how the auto biz has remained strong is the reverse. Good management vs. Poorly run g.m. and ford .anything is possible tho.perhaps you see the world turning on apple from mismanagement.only time will tell.they seem to be alright now. And with the new products coming to fruation it seems improbable.

  • Report this Comment On January 06, 2013, at 10:04 AM, z1mm3r wrote:

    Simply put, too simply put. Not even a thesis.

    I hope Apple ignores all this noise and continues to execute smartly.

    Android is a malware magnet that Google uses for mobile search. Samsung is leaving Android behind, so maybe you can resubmit your article after swapping Google for Apple.

    The top dogs have attractive, sticky ecosystems. The winners hold onto mindshare.

  • Report this Comment On January 06, 2013, at 10:57 AM, aappllee wrote:

    Will America become retarded like japan , look at the nuclear reactor fiasco. Are you saying its a virus and will spread and we will become a idiotocrcy. Watching congress lately,one has to wonder

  • Report this Comment On January 06, 2013, at 12:15 PM, dstb wrote:

    Yes. You figured it out. Apple is Nintendo.

  • Report this Comment On January 06, 2013, at 12:34 PM, wordjunkie wrote:

    When the bashers have to reach this far, you know the bashing has reached its illogical conclusion. Time to load up on AAPL for the slingshot.

  • Report this Comment On January 06, 2013, at 12:41 PM, JT1951 wrote:

    Rick ~ You already know the answer to your question.

    First off - Apple products have NEVER been the biggest and fastest.... but they just were the most stylish and gave the best user experience.

    Second - Yes the iPhone is more expensive but it also a status symbol of the rich and famous. This makes it the phone wanted by all that want to be rich and famous. That's a lot of people. And a survey reports 92% of iPhone owners upgrade to the next iPhone.

    Third - The iPhone is bought by the well off who don't buy the cheaper smart phones that are outselling the upper end now. So as Android increases market share it is almost all made up of low priced phones by people who would not be buying the iPhone due to it's cost anyway.

    Fourth - The iPad is killing the tablet competition. And now with the iPad Mini they will be killing the Kindle. You will soon see that Amazon cannot sell tablets at a loss and make up for it in content sales.

    Fifth - This article you wrote to get people to read your column. You are quite aware that what you wrote is total fiction. It worked...good job.

  • Report this Comment On January 06, 2013, at 1:11 PM, bigdogbonz wrote:

    Hey Rick, are you married? I think your wife may be the next Tammy Fae Baker...just saying its a real possibility since they are becoming so similar!

  • Report this Comment On January 06, 2013, at 3:06 PM, TimKnows wrote:

    Apple has many negatives to deal with going into 2013. You can make money on AAPL from the short this year, a safe bet.

  • Report this Comment On January 06, 2013, at 6:49 PM, jbelkin wrote:

    There are two things. Your comparison is either an attempt to garner page views or you're a simpleton. You are arguing Apple might possibly decline but that argument can be applied to anything on EARTH. Arguing that Apple the company is like the lifespan of an apple tree can be used also but it's simplistic and you;re really not saying anything beyond things live and die on Earth. Really? We needed thousands of words from you to say that? The two markets are NOT the same. Yes, they have influence and impact each other but they are not the same. I could upend your argument with a few points. Nintendo is crazy insular and refuses to really listen. Apple is set in its way but is willing to change - Apple wanted to have the ipod and itunes only work on the mac but realized they could make much more money selling to mac and win users - that right away separates nintendo from Apple. They wanted to sell the iphone at full cost without subsidizes but after a few months realized that it was better to go the "normal" way and even sent all early buyers a check ... not the Nintendo way ... but then again, facts would ruin your simpleton argument because facts don't fit your theory. Nintendo's Wii killed XBox & PS3 for YEARS precisely because it was a lower specs machine, cheaper but played BETTER even though everyone thought the graphics was weak. In fact, because of the Wii, Xbox is the $20 BILLION dollar hole it will never climb out of and smased a big hole in Sony's PS3 hopes to dominate the living room, in fact, the belief of SPECS only was what caused the Xbox and PS3 to be overkill in costs of production. AND Android has NEVER had sales based on specs. The "best" Android phones have NEVER outsold the iPhone for more than 30 days. Other tahn the 3 weeks leading up to a new iphone, no android phone has had much sales success. Yes, they move a lot of free or cheap android phones but it's evident from their lack of internet usage (Android should comprise over 50-60% of smartphones internet usage but is around 30%). And Apple makes 85% of all the profits in the smartphone market - so is there another industry where most of the companies in it are either in it as a hobby or too inept to make money?

  • Report this Comment On January 06, 2013, at 7:03 PM, athanSNelson wrote:

    Is Apple the Next Nintendo?

    Apple stock forecast for this week:

    http://alturl.com/iegrw

    Good luck

  • Report this Comment On January 06, 2013, at 8:11 PM, OceanJackson wrote:

    I hope Apple is the Nintendo of today...because Nintendo is back on the rise.

    It's you who is tired and out of touch.

    Despite Nintendo management's poor projections, admittedly there have been too many, the performance after the 3DS mis-pricing debacle of 2011 has been stellar.

    The 3DS is outpacing the sales of the best selling console of all-time, it's predecessor - the DS. And it's been sold for a profit since September of 2012. The 3DS is in "printing money" mode.

    Digital downloads of premium Nintendo games through Nintendo's revamped E-Shop's on both the 3DS & Wii U are blazing hot.

    The Wii U has sold 2.48 million consoles in 6 weeks. And that's the 3rd best launch in history.

    Furthermore the weak Yen will significantly boost Nintendo's profits.

    Apple is finally getting its footing in the post-Jobs era. It's going to post yet another record breaking quarter in just a few weeks, and once the Apple iTV is announced, you'll be eating your hat - big time.

  • Report this Comment On January 06, 2013, at 11:49 PM, Trololololo wrote:

    Article read by mistake. I should have avoided the click-whoring headline and the sheer stupidity behind it.

    The fundamentals of Apple have not changed. It is still growing at a pace any company would dream of having. The company continues to innovate. Only hype and sentiment are different. And it would take but one blow-out earnings announcement that beats the usually inaccurate estimates of Wall $treet analysts to change sentiment in the other direction.

    I don't care about market share. I care about earnings growth and cash generation. I don't care that Apple does not have NFC. Given that no real NFC standard has emerged, it would be silly to jump in prematurely.

    What disappoints me about Motley Fool is that some articles are written by amateurs. They lack insight and are mere blogs with poorly researched opinions masquerading as fact. This article is a case in point. That you can surf MF and see two articles published on the same day that are diametrically opposed to one another, or articles hyping a promising yet almost dangerously overpriced stock (3D Systems comes to mind) makes me think twice about the cheerleading or dismissive tone of much of what I read here.

    Don't get me wrong. The work of the Gardner brothers in particular is most impressive. I subscribe to two different MF services and have for years. I agree with the Gardners' approach to investing and am a hard-core believer in fundamentals and buying a great company at a good price.

    But when I see fluff like the article above, I can only say that I am badly disappointed. Mr. Munarriz, please grow up.

  • Report this Comment On January 07, 2013, at 2:05 AM, AdamChew wrote:

    NFC is a great feature?

    Lumina camera is great?

    You are hilarious and time to stop helping the shorts, oh, I get it now you are one of the shorts.

  • Report this Comment On January 07, 2013, at 10:27 AM, sheldonross wrote:

    Apple, Apple, Apple Rah Rah Rah!!

    Lol you commenters are hilarious.

  • Report this Comment On January 07, 2013, at 10:37 AM, somethingnew wrote:

    Well they both make games that are certainly boring enough so in that case, yes, Apple could become the next Nintendo.

  • Report this Comment On January 07, 2013, at 2:18 PM, TheRealRacc wrote:

    Sheldon, you HAVE to love it at least a little bit.

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