Pachter: Nintendo “should consider getting out of the Wii U business”

michael-pachter

Wedbush Securities analyst Michael Pachter has once again waded into Nintendo’s current situation, writing in his latest investor’s note that they should cut their losses with Wii U “and consider going back to the drawing board on consoles.”

Such comments came in response to Nintendo revising their financial forecast for the fiscal year, the analyst serving up his own advice as to how the company can return to profitability and reverse the woes that they are experiencing.

“It is clear to us that the old Nintendo model of proprietary hardware supported by compelling proprietary software is broken,” Pachter writes. “Nintendo’s proprietary software continues to be first rate, but its console hardware is not competitive; the Wii U is under-powered relative to next generation offerings from Sony and Microsoft, and is not competitively priced (priced similar to current generation offerings from the competition).

“We don’t think Nintendo should exit the console hardware business, but think it should consider getting out of the Wii U business, and consider going back to the drawing board on consoles. Nintendo has a console in the marketplace that isn’t working, and if it continues to tilt at windmills, its software sales will suffer.”

Looking to address Nintendo’s woes with the Wii U, Pachter suggests the company release their software for PlayStation 4 and Xbox One, the most short-sighted of his comments not only due to the fact that it will never happen, but that it would cost them far more money to readjust their resources to do so.

He continued, “Under its current business model, if Nintendo discontinued the Wii U, it would sell no console software. We believe that it should reconsider its ‘all proprietary, all the time’ model, and should consider making its proprietary console software available on other platforms until it is able to release a new console. Once Nintendo has a new console on the market, we think it would make sense for the company to pull all of its software from the PS4 and Xbox One, and go back to being a proprietary software maker. In the meantime, we believe that the company has a problem that it is not acknowledging or addressing.”

Nintendo’s president Satoru Iwata has stated that solving their problems aren’t as simple as releasing their software on smartphones, but Pachter’s still keen for them to do so with Game Boy Advance, allowing them to promote their more recent releases on 3DS.

“The company’s handheld woes are far more complicated,” he explained. “The handheld business is not failing, but Nintendo handhelds have lost share to mobile and tablet games, and the company will have trouble getting that back. We believe that Nintendo would benefit immensely from embracing mobile and tablet, placing GBA games on those platforms for paid download ($4.99 – 9.99) and developing a broader audience, then releasing current games on the 3DS and exploiting its larger customer base by convincing them to buy a 3DS and a more expensive game. That’s hard to pull off, but we believe that Nintendo has the IP to do so.

“We don’t believe that Nintendo’s troubles are indicative of anything other than that it has an uncompetitive console in the marketplace and mobile is cannibalizing dedicated handheld sales. If Nintendo management addresses these problems, we think that the company has sufficiently strong IP to reverse course and become profitable.”

[Thanks Games Industry International]

Written by
After starting out with a Yellow Game Boy and a copy of Donkey Kong Land, Alex once hid in his room to play The Legend of Zelda: Ocarina of Time one Christmas. Now he shares his thoughts on Nintendo Insider, keeping track of everything to do with Nintendo.

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