Wall Street: Nintendo “Blew It” With Wii U, “In Disarray”

Michael Pachter, the highly visible industry analyst for Wedbush-Morgan, has stirred a hornet’s nest, stating that Nintendo Co., Ltd (ADR) (PINK:NTDOY) “blew it” with the Wii U, and the console manufacturer is “in disarray”.

Pachter spoke at Ayzenberg’s A-List Summit 2012, and stated:

“I think Nintendo is in disarray. I think they’ve completely blown the Wii U by not telling people what the price is going to be. It’s going to launch at $249 because it has to. I think they’re dead anyway because Xbox with Kinect will be priced below that by the time they launch.”

He also commented, “Wii was a bubble and that the Wii bubble has burst.”

This, of course, caused a firestorm of discussion, both supporting and detracting. On NeoGAF, Pachter took the time to explain his speech:

I believe (and please feel free to disagree) that a large portion of the Wii audience comprised casual gamers–those who bought one or two games a year the first two years, then put the Wii aside–and that those casual gamers moved on to another platform. The “other” platform may have been Facebook games, smart phone games, tablet games, or one of the other consoles, but once they moved on, they are not likely to come back.

At the same time, I believe (again, please feel free to disagree) that the growth of smart phones and tablets has attracted many potential dedicated handheld game customers, and these people also are unlikely to come back to either 3DS or PS Vita.

Summing this up, I think the addressable market for the Wii U is around half of the market for the Wii, and I think Microsoft and Sony will compete for a portion of that market if the Wii U is priced too high. I think that the dedicated handheld market is permanently impacted by smart phones and tablets, and think that Nintendo’s addressable market is probably also half of its former market.

Nintendo is in disarray because they waited too long to launch the Wii U. I know that this sounds like (and is) sour grapes because they didn’t launch the Wii HD in 2009 or 2010 as I “predicted”. They should have, and because they didn’t, the decline in Wii and DS hardware and software sales drove them into generating LOSSES. For those of you who aren’t financial analysts, losses mean that the company is worth less than it was before. Nintendo stock has dropped by over 80% in the last few years, and the market has appreciated over the same period. I’m paid to advise investors, and none have made a profit owning Nintendo stock. I don’t think that many will make a profit over the next few years, because I don’t think Nintendo’s strategy will return them to profitability.

“If the context above infuriates you, go back to school and pay attention, then read it again ;-) ” he added.

The Wii U is expected to be released this holiday season with a price tag of $399.99. Let us know what you think.

Jonah Falcon is a blogger for TMRzoo and GameStooge.com and covers all gaming consoles and platforms including Sony Playstation 3, Microsoft XBOX 360, Nintendo Wii, Sony PSP and computer games designed for Mac OS, Microsoft Windows and Linux operating systems. Jonah provides his readers with reviews, previews, release dates and up to date gaming industry news, trailers and rumors.

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