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Tech: "Doomed" Nintendo Pressed to Exit Hardware After Wii U Flop
Member Since: 1/1/2013
Posts: 3,975
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"Doomed" Nintendo Pressed to Exit Hardware After Wii U Flop
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Nintendo Slumps Amid Pressure to Exit Hardware
Nintendo Co. (7974) is under pressure to consider exiting production of video-game machines after reporting disappointing sales of its Wii U console and forecasting a surprise loss, prompting its stock to tumble.
Nintendo, based in Kyoto, Japan, fell 12 percent to 12,885 yen, the biggest intraday plunge since July 2011, at 10:11 a.m. in Tokyo trading. The company on Jan. 17 projected an operating loss for the year ending in March and cut its forecast for annual sales of the year-old Wii U by more than two-thirds.
President Satoru Iwata should concede defeat with the Wii U, shut down production and open up Nintendo’s iconic software characters including Zelda and Super Mario to the smartphones, tablets and consoles that have made a shambles of his strategy, said Michael Pachter, an analyst with Wedbush Securities in Los Angeles. Nintendo should exit hardware altogether, Pachter said.
Iwata “has to take responsibility for the Wii U missing the mark,” Pachter said. “He will be under pressure to make dramatic changes. If he can do so while remaining in charge, more power to him, but they need to make some changes.”
Iwata, 54, says he’s not going to step down and plans to see the company through its unspecified transition. To date, he has refused to offer Nintendo franchises for competing console systems or mobile devices. He’s considering changing the business model, he said Jan. 17 without offering specifics.
“Given the expansion of smart devices, we are naturally studying how smart devices can be used to grow the game-player business,” Iwata said at an Osaka press conference. “It’s not as simple as enabling Mario to move on a smartphone.”
Tying Nintendo’s iconic characters to its hardware helped boost demand for the original Wii, which sold more than 100 million units and became the world’s best-selling console.
This time delays in its own titles hurt sales of the Wii U, which debuted in November 2012. The console’s failure in the marketplace is dragging down its higher-margin software sales. The company, which had projected a 100 billion-yen ($959 million) operating profit for the fiscal year, now forecasts a 35 billion-yen operating loss.
“Nintendo should offer Super Mario or Zelda games on smartphones and tablets and raise money,” said Tomoaki Kawasaki, an analyst at Iwai Cosmo Holdings Inc. in Tokyo. “If such games become popular, some people may want to play it on Nintendo’s machines.”
Doomed Console
Nintendo on Jan. 17 lowered its annual sales forecast to 2.8 million Wii U units from 9 million, and halved its projection for game sales for the system to 19 million units. The company cut its forecast for the 3DS handheld player by 25 percent to 13.5 million units, a drop from a year earlier.
“What they ought to do is cut their losses now and probably shut the Wii U down,” Richard Windsor, an independent analyst at Radio Free Mobile, told Bloomberg Television on Jan. 17. “Looking at the history of Japanese management, they tend to fight it out for much longer than they should, and I suspect that is what Nintendo will do.”
The casual gamers who made Nintendo the leader of a $93 billion industry have abandoned its standalone machines, including the 3DS and the Wii U, for cheap downloads they can play on an Android phone or an Apple Inc. (AAPL) iPad. New, faster consoles from Sony Corp. (SNE) and Microsoft Corp. (MSFT) ran away with the hardcore players still willing to plunk down $400 or more for a machine and $60 for a title like “Call of Duty.”
Smartphone Market
Even at $300, the Wii U is doomed because it’s not popular enough for outside developers to make games for, said Ben Bajarin, an analyst with consulting firm Creative Strategies Inc.
“They need to go back to the drawing board to reinvent themselves,” Bajarin said in an interview. “The Wii U didn’t move the needle in gaming, so they need to rethink the value of tightly integrated hardware, software and services.”
Iwata should focus on delivering Nintendo’s iconic characters to mobile devices and the PlayStation and Xbox consoles, Pachter said. Both the Wii U and 3DS handheld take advantage of touchscreen controls to play many Nintendo games, which would make it easier for the company to deliver versions of its games for smartphones and tablets, he said.
With more than 1.5 billion smartphones in consumers’ hands, Nintendo could release 10 games a year from its library of 1,500 titles, charge $5 to $10 per mobile game, and sell at least 50 million copies of each to a core Nintendo audience, Pachter said. These products alone would generate $2.5 billion to $5 billion a year in high-margin sales without the expense of making hardware.
Cash Cushion
On top of that, Nintendo could keep releasing more expensive titles for consoles, Pachter said. He pointed to the approach taken by game publisher Electronic Arts Inc. (EA), which is offering “Plants vs Zombies” on multiple platforms.
EA sells a 99-cent version for the iPhone and will offer its latest “Plants vs Zombies: Garden Warfare” as an Xbox exclusive, charging $30 for the Xbox 360 and $40 on the Xbox One.
“The Wii U hasn’t sold well because of Iwata’s misjudgment,” Yoshihiro Okumura, a general manager at Chiba-Gin Asset Management Co. in Tokyo, said today. “He needs to show a new strategy.”
Making the transition to software maker from console hardware isn’t without risk. Sega Corp., once a leader in video-game consoles, ended production in 2001 and is now part of a company that also makes Pachinko machines and operates amusement parks, Sega Sammy Holdings Inc. (6460)
Atari Inc., the video-game pioneer that developed “Pong,” filed for bankruptcy protection last year seeking independence from its French parent, Atari SA. (ATA)
ADRs Plunge
In its most recent fiscal year, Nintendo generated the equivalent of $2.9 billion in software revenue and $4.8 billion in hardware, according to data compiled by Bloomberg. The company had 845 billion yen in cash, near-cash and short-term investments as of Sept. 30 and no long-term debt, giving Iwata a cushion to develop a new strategy.
Nintendo American depositary receipts fell 17 percent to $14.90 on Jan. 17 in New York, their biggest decline since September 2001. Each ADR equals 0.125 underlying shares. The shares last year advanced 54 percent in Tokyo trading.
While Pachter recommends exiting the hardware business altogether, making even a temporary shift would buy Iwata time to develop a new console that leapfrogs Microsoft and Sony in three years.
“Nintendo’s console side is broken,” Pachter said in an interview. “They’re not even an also-ran there, they just don’t matter.”
Source: Bloomberg
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Wow! Very troubling news!
I hope Nintendo can turn it around
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Member Since: 12/3/2010
Posts: 19,759
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Lol...they just need to make a system people want to buy and play. For once in the last gajillion years.
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Member Since: 8/18/2013
Posts: 5,608
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Member Since: 1/3/2014
Posts: 15,909
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Oops. That is what Nintendo gets for not getting serious in providing a TRUE CURRENT gen experience for its players and the third party developers. Had they made an up to par system with the PS4 and the XboxOne, they would not be in this situation. It is really sad that it is coming down like this because they were the ones who revolutionized 3D gaming and now they are the ones falling behind.
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Member Since: 8/18/2013
Posts: 12,079
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What kind of over dramatic mess?
This is all a kii honestly. Everyone is qualified to speak on the gaming market and what Nintendo should and should not do? A mess.
Let me sit and perch for what Nintendo actually does. Bet it actually draws in money and Wii U remains.
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Member Since: 8/19/2013
Posts: 2,973
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Embarrassing
They also need to end region locking, why are they still continuing the archaic practice?
A lot of the gamers I see on forums are definitely not fans of Region Locking so why continue to do so Nintendo?
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Member Since: 1/4/2014
Posts: 2,945
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nintendo sis.... give me an smartphone with super mario 3 and I will throw my iphone 5s though the window
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Member Since: 1/1/2014
Posts: 10,523
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These absolute LIES.
I'm a Sony Fanboy so NO BIAS here, but with the success Nintendo's had in the past, he could release a hundred more flops and they'd still be swimming in coin.
Plus the 3DS is the #1 console at the moment.
BYE.
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Member Since: 12/15/2009
Posts: 23,385
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Oh well. Maybe now I will check out the definitive Mario World xbox one version. I mean don't even get me started with nintendo's ancient online ecosystem
Quote:
Originally posted by Lexiel
These absolute LIES.
I'm a Sony Fanboy so NO BIAS here, but with the success Nintendo's had in the past, he could release a hundred more flops and they'd still be swimming in coin.
Plus the 3DS is the #1 console at the moment.
BYE.
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Since when is a handheld kid's toy a console.
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Member Since: 1/6/2012
Posts: 15,374
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this is what happens when you are 2 gens behind
they cannot even do online gaming right
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Member Since: 9/12/2012
Posts: 1,507
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So many lies.
By the way, Michael Pachter is considered a joke and a troll.
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Member Since: 11/13/2009
Posts: 25,902
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So will all oft their games be available on other consoles? Long live the Mario Bros. franchise tbh
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Member Since: 1/3/2014
Posts: 15,909
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Quote:
Originally posted by NaughtyDog
this is what happens when you are 2 gens behind
they cannot even do online gaming right
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This. Online gaming, especially for their catalog of games, should not be this foreign concept for them. They can easily slay Sony and Microsoft with their online friendly games if they made it easier to do so.
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Member Since: 10/3/2010
Posts: 50,276
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Screaming. They are coming for the Dreamcast's wig.
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Member Since: 8/17/2013
Posts: 13,869
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It would be too messy for them to drop their hardware now. They should just publish some of their games on other platforms (PS4 XB1 PC Smartphone ) and collect those extra coins while they R&D for their Q4 2016 Console release. Drop all the gimmicks with the next console and just serve power and beauty.
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Member Since: 8/18/2013
Posts: 12,079
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Quote:
Originally posted by Lexiel
These absolute LIES.
I'm a Sony Fanboy so NO BIAS here, but with the success Nintendo's had in the past, he could release a hundred more flops and they'd still be swimming in coin.
Plus the 3DS is the #1 console at the moment.
BYE.
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People are going to act like the OP is true because they hate Nintendo for whatever reason. Thankfully, stock holders don't truly dictate your decisions as a company unless things are in the pit. Nintendo's lows are a lot of other companies' highs. The article is a joke.
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Member Since: 8/18/2013
Posts: 8,249
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Nintendo can afford 4 GameCube/Wii U sized flops and STILL have enough success (thanks to Wii/DS). Now stop reaching.
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Member Since: 11/10/2011
Posts: 14,820
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Member Since: 1/6/2012
Posts: 15,374
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Quote:
Originally posted by TheGeoKing
Screaming. They are coming for the Dreamcast's wig.
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giving me RIM teas tbh
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Member Since: 5/31/2008
Posts: 11,688
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Either that, or go back to the drawing board and release a good console.
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