Nintendo (PINK: NTDOY ) shareholders are not happy. The company was trading
close to $80 back in 2007. Now its trading below $18. The goose that laid golden
eggs just three years ago is now laying stinkers. The companys newest device
the glasses-free, stereoscopic, 3D portable gaming machine Nintendo 3DS tanked
so hard after releasing in March that the company had to cut its projections for
the next fiscal year from around $1.3 billion to just above $260 million. Now
investors want Nintendo to give up the video game machine business entirely and
focus on profiting off its popular game franchises like Super Mario Bros. and
Pokemon by publishing on other machines. According to a report at Bloomberg ,
those investors want Nintendo on Apple s (NASDAQ: AAPL ) iPhone and iPad, and
they want it now. Apple and Nintendo have been dancing around one another for
the past decade. At the beginning of the 00s, Nintendo had a lock on the
youth-targeted portable electronics market with its Game Boy portable game
player. By 2005, Apple had overcome its 20-year history as a perpetual runner-up
thanks to the sleek, useful iPod, and it was the fifth generation of that device
that saw Apple start to pursue portable gaming. At the same time, Nintendo was
making waves with its Game Boy successor, the touchscreen-equipped Nintendo DS.
It was in 2006 when Nintendo released the new model, the streamlined Nintendo DS
Lite and the motion control-based home console the Nintendo Wii both of which
borrowed liberally from the clean, simple design of Apples products that
Nintendos business started to boom. Apple escalated the growing cold war in 2007
with the iPod Touch and iPhone, devices that not only replicated both the
Nintendo DS touch interface and the Wiis motion controls, but offered games
through the App Store at a mere fraction of the price. In 2011, Apple is selling
around 9 million iPads per quarter. Nintendo has released a 3D-based handheld
that consumers are ignoring, and it announced a new home console called the
WiiU, a device whose controller is a truncated tablet computer. No wonder
shareholders are pressuring Nintendo to bring its wares to the competition; from
this vantage, Apple has pulled ahead by so wide a margin its impossible to catch
up. It never will happen. Nintendo is arguably more protective of its
intellectual property than Apple, and it has refused to license any of its
franchise characters to other companies since its ill-fated partnership with
Philips (NYSE: PHG ) back in the early 90s. Still, unless the company wants to
watch its market cap dip below $20 billion, something needs to change. Nintendos
woes at this point in time have less to do with needing to bring Mario , The
Legend of Zelda and Pokemon to the iPhone and Google (NASDAQ: GOOG ) Android
devices and more to do with needing to dramatically redefine its business model.
As long as Nintendo insists on focusing on retail products like the upcoming
Super Mario 3D Land that cost $40 or more and feature little to no online
functionality, it is going to watch its profits disappear to 99-cent powerhouses
like Rovios ubiquitous Angry Birds . Nintendos digital download business also is
a joke. The company charges $5 to download a 25-year-old Zelda game. Meanwhile,
the audience for that game can purchase a modern, comparable title on the App
Store for 99-cents, and it will include Facebook functionality so they can
compare their progress with friends. Nintendo found success by imitating Apple,
and vice versa. Nintendo needs to do more than mimic Apples design now. It has
to borrow its entire content business model or risk disappearing from the market
completely. As of this writing, Anthony John Agnello did not own a position in
any of the stocks named here. Follow him on Twitter at
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