A Ray of Hope for Nintendo

Nintendo (NASDAQOTH: NTDOY  ) may be down, but it's not out. New sales figures released this week show a hint of success for the company on both the hardware and software sides of the video-game market lately. And that's good news for investors betting that Nintendo can beat the odds and post a strong holiday quarter.

According to research firm NPD, the 3DS handheld system outsold all other hardware platforms last month -- for the fourth month in a row. The 3DS has been a real bright spot for Nintendo, booking 32 million device sales since launch. The system's Mario & Luigi: Dream Team title also had a great start in August, coming in as the sixth best-selling title across all console and PC platforms. But the really good news for Nintendo was that Pikmin 3, a Wii U exclusive, also made the top-10 list for software sales last month. That's quite a feat, considering the hefty competition from the likes of Electronic Arts and Disney. It's also impressive considering that the installed base for the Wii U is less than 4 million, a tiny fraction of the numbers that Microsoft (NASDAQ: MSFT  ) and Sony have built up for their current generation systems.

August's strong results suggest that Nintendo was right when it blamed the lack of first-party titles for the brutal launch that the Wii U has had. That struggling console suffered a terrible inaugural year in the market, selling well below the 10 million Xbox 360 devices that Microsoft moved in the same period. And the spring quarter was especially bad for the Wii U: Nintendo managed to sell just 160,000 units worldwide.

However, the company has been saying that new games will turn the tide on its console and eventually make it a contender against the more expensive next-gen offerings from Sony and Microsoft. So with the price cut announced last month, and a new crop of first-party games lined up, Nintendo aims to charge back into console relevance.

The Pikman 3 title was the company's first jab at that strategy, to be followed by highly anticipated additions to the powerhouse franchises of Zelda, Donkey Kong, and Super Mario in the months ahead. If those games are as well received as Pikman 3, they'll easily drag the Wii U's sales numbers higher. And, together with an already strong-selling 3DS, Nintendo might just log some respectable results this holiday.

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  • Report this Comment On September 14, 2013, at 1:19 PM, OzzyA wrote:

    A positive article on Nintendo by Motley Fool? Who would've thought it?

  • Report this Comment On September 14, 2013, at 1:52 PM, Balexdk wrote:

    And just last month Nintendo was doomed, unless they started making pay to win apps on the iPhone.

  • Report this Comment On September 14, 2013, at 3:40 PM, typicalguy wrote:

    I feel this article is not providing a good explanation of the situation. Pikmin 3 is NOT selling well and the Wii U is in big trouble.

    August is traditionally the slowest month of the year in terms of video game sales and 125k sold over 4 weeks is absolutely horrible. That's tracking to sell about 350k units over it's lifetime. Most 3rd party games require 2 million in sales to break even. Since Nintendo doesn't have to pay a licensing fee it will probably break even at 1.5 million sales. It's not going to get even 1/3rd of the way to break even.

    Nintendo's Wii U costs more to make than they sell it for and they just lowered the price $50 so now it's losing even more money.

    The Wii U has been virtually abandoned by 3rd party developers so there will be no revenue stream of licensing fees to help cover the losses of the Wii U hardware.

    The more hardware they sell, the more hardware losses they take. The less hardware they sell, the more software losses they take. They can wait out the hardware and let it become cheaper to make before really trying to sell loads of it but that would mean that the money they put into development will be wasted over the next couple of years as the software continues to sell at huge losses.

    Nintendo painted themselves into a corner with the Wii U and I fully expect them to abandon the platform and move on in the next 2 years. They may give up on home consoles altogether and stick with handhelds but I think they'll give it at least one more shot before giving up.

  • Report this Comment On September 14, 2013, at 5:56 PM, midarkmind wrote:

    Well I think people got it all wrong. People have to understand that this system is going to have a long self life. It just came out for heaves sakes. Its a long game so what? That's they way they are going to play it. Its not going to be like SEGA where they just fold and say F it! Nintendo is going to break even eventally. Once the games come out like Zelda and maybe even a couple of RPGs if we are lucky. They system will be relevant again. And people for get which game is the highest selling game of all time? Wii sports? Not Halo, not final fantasy... Wii freaking sports! So just so everyone knows Nintendo has more then a few tricks up their sleeve. I am buying one and they don't even have games out yet. People like having a third option. They don't like choosing the lesser of two evils. Americans like to jump ship when they can. That's how it goes.

  • Report this Comment On September 14, 2013, at 8:36 PM, typicalguy wrote:

    midarkmind - With all due respect, I think it's a terrible idea to invest in something like this on the hopes that they'll repeat the Wii's success (you did mention Wii Sports which came with the console). This simply isn't happening.

    I know that some people invest a lot of themselves in game consoles (but not their money in the company's stock) but the Wii U is not going to last. It won't win the short game or the long game. Sales chart:

    http://4.bp.blogspot.com/-7pDFUOzR_BY/UiptWxlqsDI/AAAAAAAAAl...

    How does Nintendo make a profit off of the Wii U? I still haven't see any explanation of that. The hardware is sold at a loss and the install base is too small for the software to turn a profit. The Wii U's install base is roughly 3.5 million. That means that they have to sell any particular game to almost half their install base just to break even on it.

    Maybe people can gamble that the Wii U makes a turn around but until I see a way out, I'll believe it when I see it.

  • Report this Comment On September 14, 2013, at 8:37 PM, typicalguy wrote:

    Sorry about the second post, let me add that the sales chart shows each console's respective months after launch. Keeping this in mind, the Wii and Xbox 360 were supply constrained during the time shown on the chart. The PS3 at that time cost $600.

  • Report this Comment On September 15, 2013, at 1:35 AM, Unitearica wrote:

    It should also be pointed out that 3rd party developers have NOT pulled away from making titles for the WiiU. In fact, if one goes to any local gaming/software aisle in stores and looks and the variable WiiU games that are out there, they will find that many 3rd party developers (EA, Activision, UBISoft, WB, etc.) have made games for the WiiU after the time in which they had supposedly pulled out. These publishers ARE making games for the WiiU, they are just not actively programming games to support the WiiUPad. There has been/and still is much confusion on that particular point that have many ppl wrongly confused as to the game titles which are still being produced and made for Nintendo by 3rd party devs.

    However, it should be also noted that: both MS and Sony stated that their new systems would not be for everybody, which is why they are still developing and supporting their current systems for a good while longer.

  • Report this Comment On September 15, 2013, at 5:37 AM, feliciagjm wrote:

    Just wait till next month. October 12th, to be precise. That's when Pokemon is being released. 3DS sales will be even better. Since it's going to be exclusively on the 3DS. If it weren't, I wouldn't bother. I'd just play it on my ds lite.

    Nintendo knows their market, and the fan base is loyal. I'll buy a 3DS and play pokemon (I'm 25.) I have been since it came to America all those years ago. They've never failed to disappoint me with a pokemon game (black and white were the worst. But I still played them.) My husband is also a loyal nintendo fan, and I won't be surprised when he buys a 3DS in Bahrain and requests that I send him his copy of pokemon y :P

  • Report this Comment On September 15, 2013, at 8:57 AM, Speedracer69 wrote:

    I still have my super Nintendo and my Nintendo 64. Both work flawless and i still play on them :) I didn't care to much for the Wii and Nintendo's lastest the Wii U is not how I imagined the latest console. I plan to get the PS4 but what has me upset with both Sony and Microsoft is that they are trying to push for digital downloads of the games. I have a gaming PC so why would I invest into a console that's basically a PC? Is Microsoft and Sony's plan to push PC users toward their products? Every PC user out there that has a gaming rig would absolutely love a OS that is 100% dedicated to gaming and this drive by Sony and Microsoft might actually full fill those desires by hardcore gamers.

  • Report this Comment On September 15, 2013, at 10:31 AM, typicalguy wrote:

    feliciaqim - I'm not quite sure how the 3DS has anything to do with the success or failure of the Wii U. The 3DS is doing fine but this article is about the Wii U. If you look at Nintendo's last quarter, they sold more 3DS's (3DS + 3DS XL) YoY so it's really taking off. If you look a little closer at some of the numbers it becomes clear that the Wii U is dragging them down. Despite the profits earned from sale of the 3DS, losses from Wii U hardware and software development generated a loss for the company. They were able to earn a small profit through currency conversion but it's clear based on their financials that the Wii U is hurting the company's profitability.

    Speedracer69 - They are pushing Digital Copies but you don't have to purchase games that way if you don't want to...

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