Nintendo Announces a New DS
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Nintendo (NASDAQOTH: NTDOY.PK) of Japan has announced that they will be releasing a new DS console, the Nintendo 3DS XL, an extra large version of the 3DS (90% larger). The new console will be released in North America Aug. 19. The original 3DS was lacking in sales early on and Nintendo was forced to cut the price from $249.99 to $169.99. The company's president, Satoru Iwata, hinted that Nintendo was actually losing money on each Nintendo 3DS sale. The 3DS struggled early on due to a lack of games available for the system and competition from smart phones.
Above: Nintendo official image of the new 3DS XL in comparison with the 3DS.
During the months that followed, Nintendo published a number of successful games for the console and it became the best selling game dedicated console in history. Despite this, Nintendo's stock is still dropping, while companies that publish apps like Apple (Nasdaq: AAPL) are flourishing. Apple takes a 30% cut of every app sold, with billions of app downloads every year. Apple recently announced that 25 billion apps had been downloaded, and although that includes free downloads, it gives you an idea of how much money Apple is making off of their app store.
Is making the 3DS "XL" really the way to increase sales of the 3DS? Back in the fall of 2009, Nintendo announced that they would make an XL version of the popular DSi handheld console. The DSi console sold 26.8 million units internationally while the XL sold 12.1 million. The Nintendo DSi XL was "probably not for you," according to Gizmodo magazine, citing the fact that it had a larger screen, but larger pixels, and was too heavy and cumbersome for most players. The XL 3DS might be popular with those who are visually impared but it's too big for most games.
Using Benjamin Graham's (author of The Intelligent Investor, and mentor to Warren Buffett) "Graham Number" valuation method, the price that should be paid for Nintendo is $13.38, although Benjamin Graham said that 120% of the NCAV would be acceptable to pay for a company. This all doesn't matter though if Nintendo really does get left in the shadow of smart phones or continues to lose market share to Microsoft (NASDAQ: MSFT) Xbox 360 and Sony (NYSE: SNE) PlayStation 3.
athorburn has no positions in the stocks mentioned above. The Motley Fool owns shares of Microsoft and is short Sony (ADR) and has the following options: long JAN 2013 $22.00 calls on Sony (ADR). Motley Fool newsletter services recommend Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.