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Nintendo's Grim Future

By Mark Reeth and Michael Finarelli – Feb 7, 2014 at 4:09PM

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Nintendo seems to be firmly holding on to the old way of doing business in the video game space, and dooming itself in the process.

With the release of several new video game consoles recently, as well as the broad trend toward digital distribution of gaming titles rather than purchasing hard copies, many businesses in and related to the video game space are struggling to redefine themselves and find new footing in the new gaming landscape. And no company seems to be struggling with more difficulty than Nintendo (NTDOY -0.48%). The company recently slashed its global Wii U sales forecast for the year to March 31 by almost 70% to 2.8 million units, and it cut its sales forecast of its handheld 3DS device down from 18 million to 13.5 million units.

In this video from Thursday's Consumer Countdown, Motley Fool consumer goods analysts Mark Reeth and Mike Finarelli look deeper into Nintendo and its struggles. Mark sees the problems in the company's hardware division as being emblematic of its troubles overall. He paraphrases Wedbush securities analyst Michael Pachter on the subject, who said that Nintendo is ultimately a hardware company, looking to sell its software with the goal of increasing hardware sales. That could be the reason Nintendo is reluctant to release its software properties onto other platforms, such as tablets, but it may be this short-sighted attitude and failure to adjust its business model that ultimately dooms the legendary gaming brand.

Mark Reeth has no position in any stocks mentioned. Michael Finarelli has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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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