Wii U

[Saturnine Tenshi]

I don't think anything signaled end times for the company, but the Wii, WiiU and 3DS have certainly tempered any interest on my part. That isn't to say they don't have a profitable market. You're right about their success—arrogant or not, success is success. It's just that I'm having a hard time finding my place in it anymore. Only the 3DS can manage to remotely interest me with the things that matter, the things we should be buying consoles for: games.

[deanb]

Minor correction but none of the hardware makers went out of business last hardware generation except Gizmondo and that was legal issues. In fact quite the reverse happened (and seems to be even more and more entering the ring).

The 3DS, also suffering confusing name issues, did suffer crappy launch sales, and the Wii U looks to be on track to repeat, which isn't just "the peanut gallery" saying that but also Nintendo themselves. Having two fucked up hardware launches, minimising appearance at the trade show, and only turning a profit due to fluctuating Yen is a really weird definition for "super duper successful".

Nintendo also remains the most vulnerable of the current big three still since, just like Sega, their only product/service is video games. Which is why the Wii signalled potential end times, the Gamecube was a complete failure and if the Wii bombed as well that was it. Nintendo became either a card maker, 3rd party developer or nothing. Even Nintendo don't know why the Wii became as popular as it did (otherwise they'd have gotten the Wii U doing great out the gate). The Wii provides them with more of a cash buffer than what they had post-GC but with the Wii U and 3DS being their only major income source now it can soon fritter away. "Just like always" is an anomalous slither between 2006 and 2010, beyond that Nintendo had been heading downward since their R&D split from Sony. SNES - 50 million, N64 32 million, GC -21 million, Wii - 100million. Their portables proved the only strong suit, but for an age they had none or only one competitor, which is also something that's changed past few years and the 3DS hasn't fully handled that.

 

 

Also I don't think anyone has ever accused Nintendo of rehashing sequels nobody wants. Just rehashing sequels.

 

tl;dr - If Nintendo announce a console name that sucks and causes confusion, and people point out it sucks and causes confusion, and then it becomes the reality and it sucks and causes confusion, and then Nintendo acknowledge is sucks and causes confusion, the internet dwellers are allowed to go "told you so!".

[TheFlyingGerbil]

The Spring Update is finally out - 703mb. It also updates the gamepad which I didn't know was a posibility though I don't know what it actually did to that.

[Thursday Next]

Firstly, EA doesn't manipulate coverage, they pander to customers. See Mass Effect ending and SimCity freebies.

 

 

Nintendo's risks are

 

1. They almost entirely reliant in the videogame business on their own hardware and their own software.

2. They don't have any other business to support them if the gaming thing has a stumble.

3. They suck donkey dick when it comes to online.

 

Every time they release unsuccessful hardware it means that they have less cash to invest in the next round of hardware which decreases the chance of that hardware being successful. As Dean pointed out, that was the pattern Ninty were in before they gambled on the Wii, but there's only so many times you can get that lucky.

[TheMightyEthan]

Yeah, the Wii was an accident that saved the company, but one console does not a trend make.

[TCP]

Yeah if only they had another hugely successful console in recent years................. hmm.......

 

Considering Nintendo doesn't sell consoles at a loss (they can say whatever they like, I call BS on the Wii U being sold at a loss), their games rarely go down in price (I was at Future Shop on the weekend and Super Mario 64 DS... from 2004... was still 40 dollars, as was Mario Kart DS, and the original New Super Mario Bros), and the success of the Wii and DS, I'd wager to say Nintendo is OK for at least a few more years. Though if I was an investor, I'd be a little concerned over the 3DS and Wii U.

[TheMightyEthan]

What they've said about the Wii U is that they're selling the basic at a very slight loss, but as long as you buy one game for it they've made a profit.  I believe that.  The Deluxe is selling at a profit on each unit.

 

And I don't think anyone's saying Nintendo is going to go out of business in the next two or three years, just that the weak performance of the 3DS and Wii U might cause them problems in trying to go into the next cycle.

[Mr. GOH!]

The problem with being a publicly traded company is that they have to hang on as an attractive investment until the next cycle. If something causes investors to flee en masse and not return, well, Nintendo could fall very hard very fast. I think that its past success with the Wii may shield it for a while, but Nintendo has to raise its game well before the next cycle to prevent a even a gradual sell-off.

[Thursday Next]

Yup. Being publicly traded is about the worst thing you can do to a creative industry. You no longer just have to make a profit this year. You have to prove that you will make a bigger profit next year than you did this, and keep doing it each year after that for at least the next five years.

[TheFlyingGerbil]

How does it affect a company if its stock goes down, apart from making it a target for another company to buy?

[FMW]

I would actually like a good answer to this question.  An economics answer.  So if a company's stock value plummets the people hurt are the investors and the employees with stock options.  It also hurts the company's ability to raise new revenue through selling stock.  But... that's all I know of, and it seems like those things shouldn't keep a company from continuing to operate relatively normally in the short term.

 

I'm pretty sure I'm wrong, but that's as far as I understand the matter.  What don't I know?

[TheMightyEthan]

The only thing I can think of is that you want to keep stockholders happy because they elect the board of directors, who hires/fires executives and directs the company on the broad-scale.  But yeah, I've always kind of wondered the same thing.

[TheFlyingGerbil]

Yay, feeling slightly less stupid for asking now.

[Mr. GOH!]

The stockholders also elect the board, and the board hires management. Stockholders don't like what management is doing, management gets fired, business models get reevaluated, and strategy changes. Activist stockholders can raise a real ruckus.

 

Takeovers are also possible if the stock price gets too low. For example, right now Nintendo's Market Cap(italization) is around $15 billion; that's the value of all of Nintendo's publicly-traded stock. That's a lotta money, and would be a very large acquisition, but there are companies and funds out there that could afford to buy enough of Nintendo's stock to do a takeover. Google, for example (though not likely; there are even bigger entities out there with more cash on hand). The deal wouldn't necessarily be $15 billion in cash, as the buyer would have to buy from lots of different sellers of the stock and word would get out that X is buying up Nintendo stock and the price would increase. But you get the idea. 

 

The deal could also be friendly; a buyer could make an offer to the shareholders and they could approve.

 

Edit: @FMW This disrupts short-term operations because new management don't generally want to keep funding old management's projects; why spend even more money on failed projects/divisions/products/brands dreamt up by the people who just got sacked? Companies do operate in short-term holding patterns after big changes, but not for more than a month or two. 

Edited April 29, 2013 by Mr. GOH!

[Mister Jack]

I don't know too much about the stock market but aren't there laws in place to circumvent hostile takeovers?

[TheMightyEthan]

Hostile takeovers are part of the system, by design.  There are laws regulating the manner in which they can occur, but not to prevent them.

[Mr. GOH!]

Hostile takeovers are not necessarily a bad thing, either, if the entrenched interests at the target are bad for the company/public/industry or whatever. 

[Mister Jack]

Still seems a bit shitty that is legal to buy a smaller company that doesn't want to be bought.

[Thursday Next]

Depends what you mean by "doesn't want to be bought". No one is forced to sell their shares at gunpoint. In a normal take over a business will go to the management of the company, make and offer and the management will accept or reject that offer on behalf of the shareholders. If the offer is rejected then the potential purchaser can go directly to shareholders and directly offer to buy their shares.

 

The hostility of the takeover is directed at the managing board, not the company or the shareholders.

 

As to why a falling stock is bad, it's basically because as others have stated, your company doesn't belong to you.

 

Valve belongs to Gabe. He can do what he likes. As long as he is happy with what is going on, he can keep doing it. Take this line from Citizen Kane: "You're right, I did lose a million dollars last year. I expect to lose a million dollars this year. I expect to lose a million dollars *next* year. You know, Mr. Thatcher, at the rate of a million dollars a year, I'll have to close this place in... 60 years."

 

EA belongs to a bunch of anonymous shareholders. They won't let a company lose money for sixty years because they believe in it. Instead they will sack whoever is in charge and find someone else who promises they can fix it overnight.

[TheMightyEthan]

To add to that, hostile takeovers are often portrayed in movies and TV and such as a big company forcing the owner/founder of a company out and taking it over.  Like Thursday said though, no one's forcing the shareholders to sell their shares, so as long as that owner/founder owns a controlling share no one can make them sell it (I mean you could through threats and blackmail and stuff, but that actually is illegal).  No one, no matter how rich, can do a hostile takeover of Valve because, also like Thursday said, Gabe owns it and he doesn't have to sell it unless he wants to.

[TCP]

 

 

 

 (I mean you could through threats and blackmail and stuff, but that actually is illegal).

 

Oh man haven't done one of these in awhile:

 

[Mr. GOH!]

Well...companies can be forced to sell if they do poorly and are in debt; IIRC, creditors can force all sorts of things on a company pursuant to lending agreements. Been a long time since I actively dealt with that, though.

[TheMightyEthan]

Yeah, through bankruptcy they can be forced to sell off assets.  That's a little different than a normal hostile takeover though.

[Mr. GOH!]

It's a lot different than a hostile takeover. But I wasn't talking about bankruptcy necessarily, as that screws over just about everybody involved. I recall reading at least one case in which the creditors of a company forced it to sell assets while it was still solvent pursuant to provisions in the lending agreement. I may be misremembering, however. or it might not have been a public company.

[Thursday Next]

Being forced to sell assets by your creditors to raise cash to pay off your loans isn't a takeover of any kind. You could, I suppose give an ultimatum of "Pay off your debt in shares or we will force you into bankruptcy." But I'm not 100% on the legality of such a move.

 

All of this is a little off topic though as Ninty are nowhere near that. It does however explain how and why they are beholden to their shareholders and that they can't just ignore this stuff and make smaller profits and cooler games or whatever. They have to be commercially successful and they have to do it in a predictable, repeatable fashion.