First, let me preface by saying that i am long on Nintendo...so please understand the inherent, though hopefully quasi-reserved bias. If you disagree with my statements, please let me know why. I'm an investor, not a cheerleader...and I've been wrong before. I don't think i'm wrong with this company, but I relish countering perspectives.
1) Wii & DS - this stock price was boosted by the perception of the Wii doing so well (which it obviously has), but the true value contributor over the past couple years has been the DS. Everyone likes to chat up the Wii though. I just got back from Tokyo last week...on my subway car alone, about 25% of the riders were playing on their DS - another 50% toiling away on their cell phones...the other 25%...sleeping. Nintendo's original IP is not only blanketing their households, but also their commutes. They are building (and have been for over a decade) character dynasties. Mario & Zelda could release bricks in boxes, and people would buy them...but they're not - they are releasing top quality new games capitalizing and expanding on their most valued assets...which brings me to:
2) Software - there is a lot of chatter about how the Wii & DS are not third party friendly, and therefore those platforms can't survive long term. I would pose a different scenario - Nintendo has the largest install base of current systems in the industry, and 7 out of the top 10 sellers on those systems are original IP...they reap 100% of the recognizable revenue from those sales. I agree that to truly reach domination, they will need the third parties - and i believe that the third parties are in a dizzy frenzy to cooperate and participate in just that. EA for one, publicly announced (when John Riccitello took over as CEO) that they had underestimated the success of the Wii and DS, and would rectify that situation...they released some less than good games at first, but Smarty Pants and Playground, not to mention MySims are top tier. TTWO, UBI, ATVI...all doing the same thing - learning how to make good and great games for platforms that they didn't originally give much credit to. 2008 will present a tsunami of great third party games for Nintendo's systems.
3) The Wii is a Toy - i don't completely disagree with that. But what no one ever considers is that Nintendo likely doesn't either. The Wii shook the industry...they now have everyone's attention, a USP that is unmatched in the market, and staggeringly solid sales (not as good as they could have been with more inventory, but that's another argument). What would stop them from releasing the Wii 2? Does anyone really think that they are just resting on the success of the Wii, without preparing for their next act? Imagine the popularity of the Wii...with the power of the 360 or PS3.
Anyway...just a few points that i wanted to throw out there. I'm THRILLED to see that there is finally a Yahoo Message Board for NTDOY...i'm sure i wasn't the only one who asked for it. We should relish these early days of it...before the ALL CAP TYPING, name-calling, hate-mongering, internet tough guys start showing up and destroy the healthy and constructive debate that i've read so far here.
As usual Ellendumbass. . .
" To execute on their success, they need capital, and with interest rates in Japan they ought to be focused. . ."
Again. . with the same link you provided. . .
March 31, 2007
Cash and Equivalents line on the balance sheet shows 1,078,168.0 million yen. "Nintendo Co. Ltd. appears to have little financial risk as the company holds a substantial amount of cash on its books with little or no debt."
They don't have to borrow a damn thing. . .if you could read, you'd know that.
What else are you going to ignorantly bitch about?
Ellen. . .you're a joke.
"Nintendo did not invest enough in production of the Wii, and therefore growth is not what it ought to be."
Then you posted a link to some Numbers. . .
2006 net income 221,955.0
2007 net income 404,027.0
Followed with the ignorant statement. "yet the stock is up 125%. Either Nintendo surges production (and revenue) or the stock is way ahead of itself. "
did you even read my last post? or are you hooked on phonics?
I'll say this. . .Nintendo management has always been conservative. Take if for what it is worth.
Please change your name to Ellensdumbass, it suits you much better.
I think one reason the DS doesn't get as much hype, is people feel they can better predict the consumer demand for the DS based on what it was like for the GBA.
The Wii however is a whole new beast and there really are no parallels. People who have never bought a game console in their life are snapping up Wiis suddenly, and gauging that market is tricky.
Personally I'm loading up on more shares while the stock is under 70.
I am also long on NTDOy (I do not think this is a very easy stock to short, most bashers are SNE longs) here are the negatives that I can think of, you guys have got most of the bullish arguments out of the way.
1. Wii is a fad. I don't believe this and with what 19 million units sold and going strong this sounds unlikely. Still some of the games for the wii like Wii sports and Wii play get old real quick.
2. Inability to increase production to meet demand. The economic situation that this round of consoles is going through is really festinating. You have SNE that priced PS3 to high and had to much supply. You have xbox that has really been pretty good with inventory. Then you NTDOY who could have set the price of the Wii at 300 at least and sold as many units as they have now. How hard is it to increase production. Retool a few factories and start making them. If you need components pay to Retool more factories to make components.
3. Exchange risk. Nintendo gets nearly 75% (my own rough estimates please correct if you have a better number) of sales from outside Japan. So far the strong EURO and Pound have made up for the weak dollar with a little help from stunning sales growth. Once growth slows the effects of translation will become more apparent(probably early 09).
4. Lack of liquidity in the stock. This has been discussed in good detail on this board.
I do have a difference of opinion on one of the bullish points made on this thread. I do not think that we need very much support from 3rd party developers. Sure it would be nice for an EA boxing game that used the wii fit and wemote. Or a Grand Theft Auto that uses the zapper. In the end few if any of these games will be released exclusively for the Wii. I contend that very few people have a Wii and no other system, at least not "hardcore" gamers (I hate that term). I have an xbox 360 for my other games but I will definitely be playing Mario Kart with my friends as soon as it comes out. Ditto for Smash Bros.
Remember still no Donkey Kong title for wii, only one pokemon, none of those brainy games that sell so well for ds, what about a nintendogs? This is why Wii is so important to this company. While DS has likely peaked or at least leveled off, the Wii is still 2 years away from this point. All in all it should be 3 more years before NTDOY has to roll out a new system so for the next year or so R&D should be the lowest in years even as the company rolls out winning software title after title.