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Nintendo in make or break moment

  • 21 January 2014
  • Written by 
  • Published in Strategy

Japanese gaming giant Nintendo has shocked the industry with a worse than expected financial result, saying sales figures show it will now sell 70% less Wii U consoles than predicted.

Despite being up against Microsoft's flashy new Xbox One and Sony's PS4, Nintendo expected its older Wii U console to pick up in sales over the Christmas period last year. It didn't.

The Wii U and Nintendo's popular portable 3DS console both missed forecasts, and instead of the previously forecast annual profit of $US527 million ($600 million), Nintendo plans to report a net loss of $US240 million.

Analysts have been questioning Nintendo's broad strategy for years now, in the wake of smartphone gaming and the dominance of cheap or free games like Angry Birds.

Nintendo president Satoru Iwata said his company, first established in 1889 when it made card games, might have to make some sweeping changes in order to keep pace with the new way people are buying and playing games.

Iwata said Nintendo was considering a ''new business structure'', and that might involve Mario appearing on a smartphone.

''Given the expansion of smart devices, we are naturally studying how smart devices can be used to grow the game-player business,'' he said.

''It's not as simple as enabling Mario to move on a smartphone.''

''Would you rather buy your kid a 3DS or a Kindle?'' Michael Pachter, an analyst at Wedbush Securities, said as reported by the Guardian. Pachter said the company should quit making hardware altogether, as Sega decided to do in the 1990's.

''Nintendo is a victim of something way beyond its control.''

Even at $US300, 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."

Nintendo, based in Kyoto, Japan, fell 15 per cent to 12,445 yen ($A135.73), the biggest intraday plunge since 2011, at 9.34 am in Tokyo trading.


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