Nintendo Found a Magic Bullet

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Video game giant Nintendo (OTC: NTDOY) had high hopes for its latest handheld gaming console, the aptly named 3DS. But despite a large marketing push against an almost total lack of fresh competition, the silly thing often wound up collecting dust on store shelves, unsold.

Happily for Nintendo, the company figured out how to move these systems. August sales in the U.S. dwarfed, crushed, and downright stomped July numbers by an astonishing 260%. The bad news? Nintendo's secret sauce was a $70 price reduction.

You might jump to the conclusion that price cuts conquer all. However, you'd be failing to notice that the Microsoft (NAS: MSFT) Xbox 360 outsold even the reduced 3DS, despite not slashing prices in August. Meanwhile, Sony (NYS: SNE) joined the deep-discount party with a $50 sale on the PlayStation 3 console. That helped a bit, but the Xbox's Kinect phenomenon still killed all comers.

In other words, price cuts do indeed make a big difference, but they also hurt your bottom line. And nothing beats a truly innovative crowd-pleaser like the Kinect.

Hewlett-Packard (NYS: HPQ) saw another real-world example of this theory when it slashed the unsellable TouchPad tablet to a very affordable $99 each -- and then had to order up more units to keep customers satisfied. And Apple (NAS: AAPL) keeps showing how the more profitable high-end game is played, as premium-priced iPads and iPhones still keep outselling the world and its dog.

So the 3DS wasn't quite the sales-boosting bundle of innovation that Nintendo had hoped. Will next year's Wii refresh fare any better? Only time will tell, but game developers seem appropriately excited about the new platform. Zumba and Cooking Mama studio Majesco Entertainment (NAS: COOL) , for example, is already working on new Wii U titles -- but still says that Kinect is "the right platform to be on in a big way for probably the next 14 to 18 months."

Ouch. Keep an eye on this space by adding a few key stocks to your Foolish watchlist:

· Add Sony to My Watchlist.

· Add Microsoft to My Watchlist.

· Add Majesco Entertainment to My Watchlist.

· Add Nintendo to My Watchlist.

At the time this article was published  

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