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With few attractive titles for the holiday season and deliveries well below the goals of the company, one wonders if the Switch Nintendo Co can never become a mainstream product.
When the device debuted last year as a hybrid console that could be transported, it was the classic Nintendo – a new gadget that exceeded the standards of conventional video games. Equipped with a built-in display and hypersensitive controllers, the Switch has been touted as a worthy successor to Wii, Nintendo's successful console.
The goal was to make the gaming experience as seamless as possible, while allowing users to use the product in an innovative way, for example by turning it into a virtual piano or motorcycle. But until now, the switch has struggled to find customers beyond a core of fans. The switch is expected to reach 35 million units by March, according to the average of eight analysts established by Bloomberg, which is below the target of 38 million set by Nintendo.
After stuffing his best franchises – Super Mario, Zelda and Splatoon – In the first 12 months, the Kyoto-based company had fewer games to show in the second year, which hurt hardware sales. The cardboard accessories introduced in April, called Nintendo Labo, have for the most part failed to increase interest beyond those who were already considering taking a switch.
"All major consoles need a good second year, and Nintendo has not provided one for the Switch," said Cornelio Ash, an analyst at William O'Neil & Co in Los Angeles. "Over five years, investors thought they could sell about 90 million units. But after this year, it seems almost impossible. "
Nintendo declined to comment on the Switch's forecasts or projects, and representatives pointed to recent comments from executives stating that it was too early to assess the performance of the second year and that the company was holding to his predictions.
Historically, the vacation quarter is about half of the game maker's sales. Since March, analysts have reduced their estimates of operating profit and turnover. Nintendo shares have fallen about 33% since the peak in January, wiping out more than 20 billion US dollars (RM83.90bil) in market value. They rose less than 1% at the start of trading in Tokyo on Wednesday. The fall was initially caused by hedge funds short, but recent declines were fueled by existing shareholders, according to data from Markit Securities.
"The stock has regained its level before the Switch's announcement, which does not say much about its long-term prospects," Ash said.
Despite this, 20 of the 23 analysts monitored by Bloomberg continue to recommend the purchase of shares.
The biggest disappointment this year was Nintendo Labo, the cardboard add-ons that turn the Switch into readables. Like the Wii, they have been designed to attract non-gamers to expand the camera's customer base beyond basic fans. But sales have been difficult. Last month, Nintendo President Shuntaro Furukawa told the press in Osaka that "it would take time" to see if the product was delivering.
"The year 2018 was a confrontation with reality and brought back high expectations to Earth," said Michael Pachter, an analyst at Wedbush Securities Inc. "The switch is great, but above all it's a pocket computer and very expensive."
This opens up the possibility of price cuts. The story suggests that the cuts will have to be aggressive to work. 3DS sales only resumed when prices were reduced by 40% five months after launch, but the Wii U did not recover, even after Nintendo dropped the price by around 15%. year after its release.
"I do not see the sales increase if the price is not less than 200 USD (RM839)," said Pachter, indicating a 33% discount over Switch's current price.
If a lower price sticker would boost Switch sales, it could further reduce sales of the 3DS. Since the Switch was announced, analysts are worried about cannibalizing sales of Nintendo's other handheld gaming device. These fears were corroborated, with the total turnover of 3DS having decreased by nearly two-thirds during this financial year.
Another possibility is the introduction of different material versions, for example that designed for children. Credit Suisse Group AG sees "a high probability" that the new Switch models will go on sale next year. "Any announcement to this effect would probably occur before mid-2019, perhaps as soon as the management policy information meeting is scheduled for late January," analysts Hanako Takahashi wrote in a weekly report. last.
In addition to potential price declines and new models, new games will be the other factor of recovery. Nintendo plans big launches next year, including a new Crossing of animals game, a Pokémon title and the last installment of his Metroid series. It remains to be seen if this can expand the base of installation beyond the basic players. Tellingly, executives have not compared the switch to the Wii at investor meetings in recent months.
If Nintendo publishes a weak holiday quarter or Switch shipments indicate that it is likely to miss the fiscal year's target, leaders will face thorny questions about how they plan to regain momentum. This could pave the way for more significant changes to the platform next year.
"The switch's enthusiasm has declined rapidly," Ash said. "Unless there's a major change or something new, Switch's story is exhausted." – Bloomberg
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