During E3 2011 back in June, Nintendo revealed its upcoming Wii U console to the public. But investors didn't seem too keen on the idea of producing yet another gaming console, and market shares suddenly dropped to a five-year low. Investors were reportedly worried that Nintendo is putting too much focus on hardware and ignoring the industry shift over to social networking.
Less than a month later, reports emerged that Nintendo was possibly jumping into the smartphone sector with the launch of a Pokemon game for Apple's iOS platform. Nintendo shares jumped the most in almost four months, indicating that investors were excited about possible Nintendo games running on tablets and smartphones. Naturally Nintendo deflated the ballooning rumor, saying that it has no plans to stray away from its strategy to develop Nintendo games for Nintendo hardware.
"They just don’t get it," MF Global FXA Securities Ltd. said in a sales note that day. "Sell the stock, because a management once feted for creative out-of-box thinking have just shown how behind the times they are."
Now two months after the Wii U showing, investor opinion reportedly hasn't changed one bit. Backing up their mixed reactions stemming from the E3 2011 press event, investors still insist that Nintendo needs to focus on developing titles for Apple's iOS platform including the iPhone, iPad and iPod Touch.
"Smartphones are the new battlefield for the gaming industry," said Masamitsu Ohki, a fund manager at Tokyo-based Stats Investment Management Co. who declined to identify his holdings. "Nintendo should try to either buy its way into this platform or develop something totally new [to avoid further alienating investors]."
According to Bloomberg, a spokesman at Nintendo declined to comment beyond statements made previously by Iwata -- no surprise there. But the company is reportedly betting on price cuts rather than succumb to the smartphone sector. As of Friday, the Nintendo 3DS will be reduced $80 from its original March launch price, knocked down from $249.99 to $169.99. Walmart and Target have already started selling the device at the reduced price.
And while the price cut may be an immediate quick fix, will it save the company in the long run? As Bloomberg points out, Apple profits are climbing and propelled by downloadable games like Angry Birds for more than 200 million iPhones, iPads and iPod Touch devices to date. Nintendo's quarter was so bad that it was forced to slash its profit forecast by 82-percent, down to a level not seen since 1985.
The last acquisition Nintendo made was back in 2007 when it purchased "Xenoblade" developer Monolith Software Inc. Investors seem to think the company needs to follow in the footsteps of Electronic Arts and Japan's DeNA Co. who purchased "Plants vs. Zombies" developer PopCap Games for 1.3 billion and "Rolando" developer Ngmoco for $400 million respectively.
Right now Nintendo is reportedly sitting on a mound of cash – more than $10 billion – despite its recent quarterly woes.
"Nintendo should aggressively make acquisitions or increase returns to its shareholders," said Ii, president of Tokyo-based Commons Asset Management Inc., which held 2,200 Nintendo shares as of February. "It’s management’s task to consider how to make use of the cash."