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Analyst - 3DS declining, Wii U hurting, poor revenue will make Nintendo go third party
Coming from Global investment firm Jefferies & Co's Atul Goyal...
3DS has already started to decline. This is even before Nintendo has started to divert game developer resources towards Wii U. As Nintendo tries to ignite sales for Wii U, it will take away more resources from 3DS, which will further diminish the appeal of 3DS. Already, 3DS hardware and software has started to fade when compared to DS sales.
In our view, it is highly unlikely that Nintendo will come even close to its FY3/13 forecast of ¥100b in OP. We believe that this could trigger a meaningful change. In our view, after having been seen as completely opposed to offer its games on mobile-platforms, it is not easy for the management to change its view. However, with its comments about ‚commitment‛ and about ‚responsibility‛, in our view, the management has elegantly set the stage for a change / turnaround. In a low- probability event (we assume 20%) that they can meet this year’s OP of ¥100b, the stock will likely rise and the management will get a bit longer rope. But in all probability (we assign 80%) Nintendo will miss its ‚commitment‛ by a wide margin. That will give the management an elegant way out to change direction / strategy. It will be able to say that it has tried its level best. And that it has no other choice left but to offer games on other platforms. That said, we don’t think that this acknowledgement will come before the year-end.
It's clear that Goyal is familiar with the financial side of Nintendo, but not the company's philosophies or 'warchest'. Nintendo has said multiple times that they will not start making games for other platforms and abandon hardware, but it seems that most won't listen.
Link, Link
3DS has already started to decline. This is even before Nintendo has started to divert game developer resources towards Wii U. As Nintendo tries to ignite sales for Wii U, it will take away more resources from 3DS, which will further diminish the appeal of 3DS. Already, 3DS hardware and software has started to fade when compared to DS sales.
In our view, it is highly unlikely that Nintendo will come even close to its FY3/13 forecast of ¥100b in OP. We believe that this could trigger a meaningful change. In our view, after having been seen as completely opposed to offer its games on mobile-platforms, it is not easy for the management to change its view. However, with its comments about ‚commitment‛ and about ‚responsibility‛, in our view, the management has elegantly set the stage for a change / turnaround. In a low- probability event (we assume 20%) that they can meet this year’s OP of ¥100b, the stock will likely rise and the management will get a bit longer rope. But in all probability (we assign 80%) Nintendo will miss its ‚commitment‛ by a wide margin. That will give the management an elegant way out to change direction / strategy. It will be able to say that it has tried its level best. And that it has no other choice left but to offer games on other platforms. That said, we don’t think that this acknowledgement will come before the year-end.
It's clear that Goyal is familiar with the financial side of Nintendo, but not the company's philosophies or 'warchest'. Nintendo has said multiple times that they will not start making games for other platforms and abandon hardware, but it seems that most won't listen.
Link, Link