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Nintendo Considering Merger Or Acquisition

This week has a seen quite a lot of Nintendo news. On the positive side of things, we know that Mario Kart is coming in May and Super Smash Bros. is confirmed for this year. On the flip side, the Wii U continues to disappoint at retail, and the company has recognized that the Gamepad isn’t being used to its fullest.

Today’s piece of the story will likely come as a surprise to many. Speaking to Japanese outlet The Nikkei, president Satoru Iwata says that he hasn’t ruled out aligning Nintendo with another company. “We should abandon old assumptions about our businesses. We are considering M&As as an option,” Iwata says. “For this reason, we'll step up share buybacks."

This explains why the company made a $1.2 billion stock buyback. The market reacted favorably to the move, as profits increased by 8.2 percent per share.

Of note in The Nikkei piece is Iwata’s response to a question about the company’s listing on the stock index. “Quarterly earnings reporting is not a good fit for Nintendo,” Iwata says. “We don't know in advance how much of a hit a product can be.”

Despite the current financial trouble, investors shouldn’t expect the company to go private.  “But it is thanks to the stock market that Nintendo has grown to what it is today,” Iwata says. “I don't want to turn to a management buyout just because we are inconvenienced now.”

[Source: The Nikkei, Reuters via MCV]

 

Our Take
I’m particularly concerned about Iwata’s assertion that he and the rest of Nintendo senior management can’t project success. Certainly, there is a margin for error, but part of top management’s role is to understand the market and anticipate its interests and buying habits. This admission speaks to what many have been saying about the communication and positioning of the Wii U, and should be something investors take seriously.

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