Don't Count Nintendo Out Yet

Nobody seems to believe in Mario anymore. Most of the buzz from the gaming industry's E3 conference was around Microsoft's struggles to connect with gamers, and Sony's attempt to steal the show. Nintendo's (NASDAQOTH: NTDOY  ) Wii U, despite being the only next-gen console with actual sales to speak of, isn't considered a real threat in this battle.

Investors have apparently bought into that storyline completely. Nintendo's stock is down a brutal 80% since 2008.

Where's the restart button?
Sure, much of that negativity is justified. After all, Nintendo came in miles below its early projections for a 5.5 million-unit launch of the Wii U. It sold just 3.45 million consoles through March instead.

That smarts when you consider that the original Wii sold 5.84 million units over the same period in 2006. And, because Nintendo had the unique strategy of profiting off of its hardware sales back then, the Wii launch set the stage for record earnings in 2007.

After a much weaker start this time around, and with the company losing money on Wii U hardware, a repeat of that performance is obviously not in the cards.

It's about the games
However, it's still way too early to hand the console crown to either Microsoft or Sony. For one, even Nintendo's disappointing launch figures give it a 3.45 million-unit head start. Those sales also helped the company move 13.5 million of its next-gen game titles. Sony and Microsoft will have to start this holiday season from scratch.

More importantly, Nintendo has managed to hit these figures with one hand tied behind its back. The company's best weapons, its big-brand games, haven't even made it into stores yet.

That's a serious management misstep, but one that can be corrected. Nintendo seems to have finally worked out the kinks, and expects to have the major Wii U titles Super Mario 3D, Donkey Kong, and The Legend of Zelda all out in time for the holiday shopping season.

What a Fool believes
Getting those discs into gamers' hands won't be enough. Nintendo needs to shrink its production costs, too. And it has to do a better job differentiating its console from the others, and also from all those smartphones and tablets delivering cheap entertainment.

That won't be easy. But the first round isn't even over yet, and Nintendo has all the tools it needs to make this a competitive fight.

The other tech battle


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Comments from our Foolish Readers

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  • Report this Comment On June 29, 2013, at 12:39 AM, Wingeddamnation wrote:

    Nintendo needs better marketing and a better games. Just because they don't make shooter games (something that younger kids feel like playing now a days), doesn't mean they can't come out and revamp a whole new Nintendo character for a game. Innovation doesn't mean to make the same games with the same characters with the same mechanics over and over again. I know there are very loyal Nintendo gamers that stay true to them, but if they want to compete with the other gaming platforms, they need to get some new ideas that appeal to a younger generation...and no, I am not saying they should make a shooter....there's only so much you can keep doing with certain game characters.

  • Report this Comment On June 29, 2013, at 8:08 PM, OldJim51 wrote:

    I don't get it. To me, the Wii U is far and above the Xbox One and PS4 in what gamers wanted. It plays the it's last generation games. It has educational games that can and do expand learning abilities (along with the DSI's). It's adapts to the same controllers as the Wii. The only drawback I see is its available games. I like the Brain Games, Trivia Pursuit, and Jeopardy. It has fantastic graphics. Since it uses its last generation equipment and games it is actually saving gamers the cost of updating equipment. What's not to like?

  • Report this Comment On July 09, 2013, at 1:50 PM, tundrowalker wrote:

    Nintendo has two cycles: 1) puppy mill, 2) amazing innovation. They innovated when they came out with the Wii. But, they've been in puppy mill mode ever since. They're just churning out the same old same old, and frankly gamers are tired of it. They could afford to crank out the same old IP (Mario, Zelda, Metroid/Samus, et.al.) when they were top of the gaming world (SNES, N64, etc). But, it's getting old. Every new iteration of those series are just a rehash of the previous. They need to come up with something new. The WiiU is just the Wii with a more aggressive social model / "hardware as a service" model. The problem is that gamers have out-grown Nintendo's IP. Gamers jump from preschool games right into HALO and shooters now. They want "hard core" and "edgy" stuff. They want Grand Theft Auto. Nintendo was pretty ballsy by tossing their console out first. Unfortunately, it's underpowered compared to Xbone and PS4 (and PC's). And Xbone & PS4 all have a developer kit that makes it easy to port games between them and PC's. WiiU is not only underpowered for these games, but harder to port to. It's going to get left out. But, that could be a good thing. It could prompt Nintendo to come up with some good games of their own. If you can't make a name for yourself on hardware specs, then you need to make a name for yourself on your game library. Don't try to compete with Xbone and PS4. Be Nintendo. Do what you have done best, just do something fresh and different. The same old games are getting very old.

    As for the stock, I would pick it up now while it's in a lull. Nintendo may be down, but it's definitely not out. They will go into innovation phase, and come out with something decent. But, it will probably take another 3-5 years. Go long.

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