Investors have welcomed Nintendo’s move into smartphone gaming with open arms, however time will tell whether the initial rush of optimism is a true indicator of Nintendo’s ability to crack the growing mobile gaming market.As reported by Bloomberg, with Nintendo’s shares surging 36 per cent in the two days following the announcement, the rally risks overvaluing the move.
A partnership between Nintendo and Japanese mobile and online services company DeNA was announced this week, with the two companies to “develop and operate new game apps for smart devices and build a new multi-device membership service for consumers worldwide”.
The alliance “is intended to complement Nintendo’s dedicated video game systems business and extend Nintendo’s reach into the vast market of smart device users worldwide”.
It may not, however, be all smooth sailing.
“The market has told us they favour this move, but I think the share price may reflect over-optimism in their potential to generate profits in a highly competitive area,” Bloomberg reported Michael Pachter, an analyst at Wedbush Securities in Los Angeles, who has recommended holding Nintendo shares, as stating.
“They are doing the right thing, but it may be difficult for them to execute.”
Only new original games optimised for smart devices will be created under the alliance, with all Nintendo IP to be eligible for development.
Nintendo will be bringing a fair bit of clout and an iconic back-catalogue of characters to mobile gaming, however this is no guarantee of success.
The smart device market has been growing at pace, with Gartner figures released earlier in the month revealing sales of smartphones for 2014 totalled 1.2 billion units, up 28.4 per cent year-on-year, however a large potential market does not mean it will be easy to crack.
“This is an extremely difficult market that calls for a very different business model,” Bloomberg reported Hideki Yasuda, a Tokyo-based analyst at Ace Research Institute, as stating.
“Investors’ expectations for massive short-term profits are causing the shares to overheat.”
