One of the leading game console makers Nintendo Co. Ltd. NTDOY has finally entered the mobile gaming business by collaborating with leading Japanese mobile game maker, DeNA Co., Ltd. Under the deal, the two companies will develop gaming applications for smart devices based on Nintendo’s intellectual property.
We believe that the current boom in the mobile gaming business has finally persuaded traditional console-based game makers, like Nintendo, to enter the space. These companies were reluctant to license their intellectual property considering it to be a threat to their conventional console business. The company is now expected to launch its popular franchises such as Mario, Pokemon and Zelda on the smart devices using the DeNA platform.
According to reports, Nintendo will pick up a 10% stake in DeNA, which runs a Japanese mobile gaming portal and developed games like Final Fantasy and Blood Brothers. In exchange, DeNA will be entitled to a 1.24% stake in Nintendo. In addition, the two companies are contemplating a new multi-device membership service for smartphones, tablets, PCs and console systems, including Nintendo’sWii U and 3DS consoles, which will expand Nintendo's reach into the global smart device market.
This change in Nintendo’s business strategy has boosted investor’s confidence in the stock which gained 27.5% on close of trade on Tuesday. Notably, this Zacks Rank #3 (Hold) stock has been witnessing a bullish trend this month, gaining around 33% in the past one week and almost 48% in the past one month.
The month started with a series of good news for the company one of which was market research firm, NPD Group’s data on the video game industry. According to the research firm, the Japanese Nintendo 3DS Video Game Console became the top selling video game hardware platform in the U.S. in February.
According to reports, the company sold 395,000 3DS consoles last month. The increased sales in one of the largest video game markets has not only helped the company to set foot in the eighth-generation consoles market, but also solidified its competitive position against market leaders like Sony SNE and Microsoft MSFT.
While Nintendo is considered to be one of the biggest players in the video game industry, boasting collaborations with Apple Inc. AAPL, it still remains a late entrant. As players like King Digital Entertainment, Electronic Arts Inc. EA and Zynga ZNGA continue to dominate the mobile space, it would be interesting to see how this veteran in the console business carves its own niche.
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