Don't Count Nintendo Out Yet

Don't Count Nintendo Out Yet

Nobody seems to believe in Mario anymore. Most of the buzz from the gaming industry's E3 conference was around Microsoft's struggles to connect with gamers, and Sony's attempt to steal the show. Nintendo's Wii U, despite being the only next-gen console with actual sales to speak of, isn't considered a real threat in this battle.

Investors have apparently bought into that storyline completely. Nintendo's stock is down a brutal 80% since 2008.

Where's the restart button?
Sure, much of that negativity is justified. After all, Nintendo came in miles below its early projections for a 5.5 million-unit launch of the Wii U. It sold just 3.45 million consoles through March instead.

That smarts when you consider that the original Wii sold 5.84 million units over the same period in 2006. And, because Nintendo had the unique strategy of profiting off of its hardware sales back then, the Wii launch set the stage for record earnings in 2007.

After a much weaker start this time around, and with the company losing money on Wii U hardware, a repeat of that performance is obviously not in the cards.

It's about the games
However, it's still way too early to hand the console crown to either Microsoft or Sony. For one, even Nintendo's disappointing launch figures give it a 3.45 million-unit head start. Those sales also helped the company move 13.5 million of its next-gen game titles. Sony and Microsoft will have to start this holiday season from scratch.

More importantly, Nintendo has managed to hit these figures with one hand tied behind its back. The company's best weapons, its big-brand games, haven't even made it into stores yet.

That's a serious management misstep, but one that can be corrected. Nintendo seems to have finally worked out the kinks, and expects to have the major Wii U titles Super Mario 3D, Donkey Kong, and The Legend of Zelda all out in time for the holiday shopping season.

What a Fool believes
Getting those discs into gamers' hands won't be enough. Nintendo needs to shrink its production costs, too. And it has to do a better job differentiating its console from the others, and also from all those smartphones and tablets delivering cheap entertainment.

That won't be easy. But the first round isn't even over yet, and Nintendo has all the tools it needs to make this a competitive fight.

The other tech battle

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Fool contributor Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Nintendo. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

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