Please ensure Javascript is enabled for purposes of website accessibility

These 3 Brilliant Men Are Driving Nintendo into the Ground

By Keith Noonan – Feb 9, 2014 at 7:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Less than a decade ago, Nintendo was one of the hottest companies in tech. Now, bad decisions by three of its most important figures threaten to cripple the company.

As a conservative Japanese company, Nintendo (NTDOY) has had very little turnover when it comes to upper management. Hiroshi Yamauchi, the recently deceased former President, ran the company for over 53 years and repeatedly steered Nintendo to profits and growth. Yamauchi saw the company transform from a playing card manufacturer into the biggest name in video games and become an innovator in the interactive medium. The company's star has faded in recent years amid credible threats to its long-term future.

While Sony (SONY 0.84%) and Microsoft (MSFT -0.04%) have pursued the hardware tech race with the hopes that they can make their devices central to online and entertainment experiences, Nintendo has remained decidedly stuck in the past. Its inability to modernize and correctly react to market realities has put the company in serious danger of losing its place in the gaming industry. There are the three brilliant men who are responsible for driving Nintendo into the ground.

Senior Managing Director Genyo Takeda
As the man in charge of guiding and overseeing Nintendo's development of hardware, Genyo Takeda bears substantial responsibility for the fiasco that is the Wii U. He's also the man largely responsible for the incredible successes of 2006's Wii and 2004's DS and the creator of games like Punch-Out!! and StarTropics.

The man has shown a clear talent for introducing innovations that fundamentally alter the landscape of the industry, but there's reason to believe that he is out of touch with the demands of the current market. Takeda has been managing Nintendo's integrated research division since 1981.

One of Genyo Takeda's chief philosophies in developing Nintendo's recent hardware has been to de-emphasize the importance of technological specs. While this worked out great for the Wii console thanks to the popularity of motion controls, the strategy looks to be one of the primary contributors to Wii U's early demise. Takeda's aversion to the tech race encouraged Nintendo's developers to become complacent and played a major role in the difficulties that Nintendo has seen in transitioning to HD.

In terms of sales, the Wii U will be crushed by the PlayStation 4 and the Xbox One. After the longest console generation on record, consumers wanted extra hardware power, media features, and expanded online ecosystems. Sony and Microsoft are delivering these assets to varying degrees, while Takeda and Nintendo have served up a box that may be less capable than 2005's Xbox 360.

Senior Managing Director Shigeru Miyamoto
Whereas Genyo Takeda is largely responsible for Nintendo's hardware failings, Shigeru Miyamoto must shoulder much of the blame for the company's lagging software performance. Miyamoto is regarded as one of the greatest minds in the industry and he has created revolutionary series like "Mario" and "The Legend of Zelda." He's also failed to deliver a noteworthy hit since 2006's Wii Sports.

As a Senior Managing Director of the company, Miyamoto rarely develops games himself these days. His role finds him overseeing much of the software development that goes on at Nintendo, and the man has a great deal of say as to which titles go into production. Unfortunately, the once-visionary creator is out of touch. In a recent investor Q&A session, Miyamoto stated his belief that he and Nintendo have done an acceptable job of supplying the Wii U with the right software content.

President Satoru Iwata
Satoru Iwata was chosen by former-President Hiroshi Yamuachi as his successor and the man who would return Nintendo to its former glory. The successes of the original Wii and DS did just that and then some. Unfortunately, these systems were followed up by confusing successors that tried to recapture previous magic with rote and undesirable features. As President of the company, Iwata has repeatedly demonstrated a proclivity for ignoring obvious market realities. He is also responsible for facilitating the failings of Genyo Takeda and Shigeru Miyamoto.

The last console cycle made it abundantly clear that Western game development was on the rise and that online functionality would be key to future success. In light of these obvious truths, Iwata and company became increasingly focused on Japan and delivered a joke of an online ecosystem. Nintendo of America used to be something more than a glorified PR wing. The Kyoto-based company used to maintain partnerships with a number of Western studios, which gave its software lineups some much-needed lineup diversity. Iwata's recent strategy has been to spurn Western tastes in hopes that the industry will fall in line with more Japanese philosophies. His management of the company in recent years has been nothing short of disastrous.

Nintendo needs new players
Nintendo's expected operating loss of over $300 million is symptomatic of the belief that the company is above following trends. Iwata, Takeda, and Miyamoto were blinded by the successes of the Wii and DS, which spurred them on to hubris that now threatens to ruin the company. The close personal and working relationship between these three men has yielded a philosophy that rejects the importance of outside influence and exaggerates the extent of Nintendo's genius. While their pasts are littered with brilliant achievements, there is little reason for optimism while these men call the shots.

Keith Noonan has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Microsoft Stock Quote
$247.49 (-0.04%) $0.09
Sony Stock Quote
$82.89 (0.84%) $0.69
Nintendo Stock Quote
$10.63 (%)

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.