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OceanJackson (< 20)

The Fight of Nintendo's Life



July 31, 2012 – Comments (0) | RELATED TICKERS: NTDOY

After its first annual loss in 123 years, Nintendo's (NTDOY.PK) not going quietly into 2012's dark night. Instead they look like Rocky IV's training montage, prepping for their biggest bout yet.

Nintendo's fortunes are tied to the Wii U. They've pushed all their chips to the center. And if I'm on the other side being asked to call or fold...I'm not betting against them. 

This is familiar territory for Nintendo. They've been pronounced dead many times before. And each and every time they've come out on top.  The cyclical nature of video-games and long development cycle's gives investors and critics a collective bout of amnesia.  Well, the rumor's of Nintendo's death this time around, as before, have been greatly exaggerated. 

Nintendo dominates the hand-held gaming market and its newest iteration the 3DS XL released this month in Japan and Europe is off to a screaming start, selling 200,000 units in Japan over its opening weekend - doubling the debut of its predecessor the 3DS.  Not to mention 400,000 copies of the latest Mario title were sold through their E-Store on that same weekend.  The U.S. gets the 3DS XL in August.  

With the 3DS XL and its e-store profits rolling in, along with the industry's first major gaming console in 6 years less than 4 months away, Nintendo is poised to return to profitability.  

The Wii U has recieved glowing reviews from gamers who've played it at Nintendo's national preview events. And developers are praising the ease of doing business with Nintendo and developing for the new Console.

Here are Nintendo's keys to success:

Pricing - Discretionary consumer spending is not strong. Word on the street has the Wii U sweet spot at $299 - $350, while $400 may leave buyers behind.  Let's hope Nintendo can turn a profit in this range.

Marketing - Nintendo recently fired their PR firm Good Relations.  Their successor announced in August has its work cut out.  The Wii U is extremely powerful with the versatility of a Swiss Army Knife.  Nintendo needs a brilliant marketing campaign that widdles the complexity down to a simple, compelling message.

If Nintendo can get these right, sales will proliferate. Word of mouth will do the rest and we'll see if once again, Nintendo ends on top.  If so - expect shares to rise sharply & quickly. Nintendo looks like a strong multi-bagger candidate. 


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