I'm about to compare Apple with Nintendo , and it's not going to be pretty.
See, I'm not going to pit the world's most valuable tech company against the gaming giant in its prime. That would be too easy. I'm matching up Apple to the tired and out-of-touch Nintendo of today.
You're going to hate me. You're probably going to disagree with me. That's fine, though. Validation is cheap and isn't necessarily valuable to you as an investor.
Wii will rock you
There was a time when Nintendo turned heads. It revolutionized the portable market with its GameBoy, just as Apple did with its iPod. It set the bar with the 8-bit console, only to raise it with every update to the platform. You see that happen with every new generation of Apple products as well.
But there comes a point in time when that simply isn't enough. The Wii was originally the console of choice when it was introduced. It overcame the giggles behind the name -- just as Apple did with the iPad -- to set the industry standard. The Xbox's high-tech Kinect just doesn't happen if Wii's motion-based controller didn't get gamers off the couch.
Wii lacked the specs of its competition, just as Apple's smartphone lacks many of the traits of the best-of-breed Android devices. The iPhone 5 doesn't have the NFC chips or the larger screens found in some of the devices running Google's open-source operating system. Its camera isn't as good as shutterbugs will find in Nokia's Windows-fueled Lumia 920.
None of that mattered at first for Apple, just as it wasn't a problem initially at Nintendo. The Wii wasn't graphically as powerful as the Xbox and PS3. It didn't play movies on optical discs, while the other two systems became home-theater centerpieces. But that didn't make any difference, as the gimmick of motion-based controllers and the collection of proprietary games had players flocking to Nintendo.
What sets iOS apart from Android these days? It sure isn't the App Store anymore. Google's platform caught up with Apple late last year, when it hit 700,000 apps, and it's widely expected to beat Apple to the milestone of a million apps later this year.
Nintendo has its proprietary games that play to its advantages. You can't play Mario or Zelda anywhere else, just as Apple has its own signature applications. But just as Microsoft eventually raised the bar with Kinect to offset the motion-based advantage that Nintendo originally had, there's a perfectly capable Siri substitute for Android devices. Just as developers of violent and mature games were dissuaded from supporting Nintendo, Apple's draconian App Store ways now have some developers backing Android first.
The pie is still growing, but Nintendo consoles and Apple smartphones have been losing market share. However, the Wii has always had the advantage of being cheaper than rival consoles. The same thing obviously doesn't apply to Apple's iPhone, especially overseas, where wireless carriers aren't open to paying Apple hundreds of dollars to subsidize a single handset.
The iPhone 5's stateside price of $199 with a two-year wireless contract is reasonable. Now head out to Europe or Asia, where buyers have to shell out at least $700 to $800 for a new iPhone. Is it any wonder why Android is gaining global market share?
The ghost of Apple's future
One thing that set Nintendo apart against its console-making rivals is that it wasn't willing to take a hit on hardware. Microsoft didn't have a problem selling the Xbox at a loss, knowing that it could make up the difference in software royalties and digital downloads. The same could be said about the PS3.
Nintendo didn't have to play that game. Its inferior spec sheet and killer brand allowed it to sell the Wii at a profit, but that changed with November's debut of the Wii U. The fallen gaming rock star confirmed that it has joined its peers in subsidizing hardware late last year.
Isn't this where Apple's heading? It's not necessary to sell iPhones, iPads, and iPods at a loss, though Apple could make up the difference through its lucrative ecosystem if it ever had to. Amazon.com is trying to do exactly that by offering its Kindle products at cutthroat prices.
Things aren't that bad for Apple. However, many analysts have been talking down the company's near-term prospects, assuming that margins will be pressured in the future. How can they not? Android has closed the gap, and it's available at substantially lower price points throughout the world, given the many hardware makers and open-source nature of the platform.
Android is too big of a disruptor, just as Apple's App Store was too big of a disruptor for Nintendo's 3DS.
So is Apple the next Nintendo?
That's not a compliment anymore.
There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been handsomely rewarded, with more than 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and, more importantly, your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.
The article Is Apple the Next Nintendo? originally appeared on Fool.com.
Longtime Fool contributor Rick Aristotle Munarriz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, and Google. The Motley Fool owns shares of Amazon.com, Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.