Nintendo outlines new company direction, but it won’t save the sinking ship

Nintendo hasn’t been doing well this generation, which is something that seems to happen every other console generation. This time around, the Wii U has gravely underperformed thanks to a gimmick that didn’t catch on and severely underpowered hardware that deterred third-party development. Inching closer toward the precipice of oblivion, Nintendo realized it had to change its ways, and announced a restructuring of the company strategy. However, it doesn’t appear to be enough to right the toppled ship.
Out of the few strategies the Big N announced, the most aggressive is a $1.2 billion stock buyback which amounts to about 7.8% of its stock, or about 10 million shares. The House that Mario Built also announced that company CEO Satoru Iwata will take a 50% salary cut in order to preserve some cash for his flailing business. Interestingly, this is not the first time Iwata has slashed his salary in half. Though the Nintendo 3DS isn’t a complete failure at this stage in its life, it bombed when it first released, and Iwata took that 50% pay cut in 2011 in order to compensate. Nintendo has had a rough go of it for a while now; Bloomberg states that Nintendo has lost 80% of its value since 2007. However, the company holds a little under $9 billion and has no debt, so not only can it afford this $1.2 billion buyback, but it has enough money to strategize for the future. What that future is, though, mostly remains a mystery.
Recently, a credible Nintendo rumor site posted reportedly leaked — and very detailed — specs of Nintendo’s upcoming new consoles, the Fusion DS and Fusion Terminal. If Nintendo abandoned the Wii U and 3DS so soon after their release — which would be unprecedented if not for Sega’s post-Genesis console release cycle — and managed to trot out the two new devices well before Sony and Microsoft managed to drop the PS5 and Xbox Two, then it would be the first time in a long time that Nintendo sold consoles composed of competitive hardware. The company, though, is legendary for its stubbornness — still no Pokémon MMO, still unwilling to use competitive hardware components, mostly standing staunch against the online revolution, and not embracing the meteoric rise of smartphone and tablet gaming. What’s even weirder than Nintendo’s unwillingness to make the obvious moves that would likely save the company, is Iwata’s actual plan for bringing Nintendo back to popularity.

Confusingly, Iwata stated that Nintendo will use a “leapfrog strategy,” bypassing the (extremely successful) mobile phone market and the emerging wearable market in order to create non-wearable technology that has yet to be seen on a Nintendo console. So, it seems Nintendo will once again ignore a hugely popular market or two — most famously having ignored the online revolution — and possibly play catchup again whenever that blows up in its face.
Nintendo will also focus on quality of life applications — likely due to the moderate success of Wii Fit (even though the Wii Vitality Sensor never released) and the recent explosion of the fitness band market. This new sector of Nintendo could also focus on educational applications, as well as life management apps like the popular to-do lists that flood iOS and Android. Nintendo will reveal the plan for this new focus sometime in 2014, and will launch the initiative in April of 2015.
As for the report from earlier this week that suggested Nintendo will finally make a jump — albeit limited — to the mobile space, Iwata did state that the Big N will indeed use the mobile market in order to make connections with customers. This simply sounds like an official Nintendo app for smartphones and tablets that will serve up commercials and news. It would, however, be a very smart move to integrate Nintendo’s Miiverse into the app, so fans can access their favorite community on the go (considering the 3DS doesn’t have LTE or 3G capability).
Unfortunately, Iwata did say that Nintendo will not release games for smartphones and tablets, as the company feels that would inhibit its ability to “show its strength as an integrated hardware-software business.” This, of course, is deeply ironic because the whole reason why this stock buyback and new company strategy is happening is because Nintendo is currently not a strong integrated hardware-software business. Perhaps obnoxiously, as part of Nintendo’s “new” strategy, Iwata stated that Nintendo will stay in the business of creating traditional game consoles. So, for those of you that hoped Nintendo would go the way of Sega and finally focus on making games instead of gimmicky hardware, you’re obviously not very familiar with Nintendo.
It remains to be seen if Nintendo can capture hardware lightning in a bottle like it did with the Nintendo DS and Wii, but with that $9 billion sitting in Nintendo coffers, the company will have a little while to find that out.