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[Barrons] Apple’s Next Big Move? It Should Buy Nintendo

Oct 27, 2017
3,323
Miami, FL
I truly believe Apple purchasing or entering a strategic partnership with Nintendo would be a great move for Apple. Nintendo is extremely profitable and has some of best sustainable game franchises that can be monetized for future services offerings.

Compared to other potential targets, Nintendo is also reasonably priced.

Disclosure: I wrote the column in OP.
1) I appreciate the article having actually read it unlike 98% of the people here that responded. Thanks for writing it and putting so much information and insight into your reasoning. You draw some interesting parallels in their businesses and point out some interesting things each could gain.

2) I think you could be onto something but I don’t think Nintendo would be willing. Apple would probably do this deal without question.
 
Oct 25, 2017
3,567
Italy
Apple does not have a history of mega deals like this, but has repeatedly said they are open to large acquisitions if it adds value to its customers.
Apple will not acquire companies which can't be incorporated smoothly in their ecosystems. That's why they don't care about acquiring companies that are their own thing in consumer markets. Tech companies? Sure. Entertainment companies with their own history in making dedicated devices? Lol.

Nintendo contents under a subscription model wouldn't justify a purchase. That could perfectly work under a partnership.
 
Oct 25, 2017
5,044
UK/FR
That would be really awful, especially with current Apple.
Wouldn't be really interesting for them considering their strategy too.

Been a while since a bad "X should buy Y" article...
 
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Oct 25, 2017
24
Apple will not acquire companies which can't be incorporated smoothly in their ecosystems. That's why they don't care about acquiring companies that are their own thing in consumer markets. Tech companies? Sure. Entertainment companies with their own history in making dedicated devices? Lol.

Nintendo contents under a subscription model wouldn't justify a purchase. That could perfectly work under a partnership.
Exactly this, really. Good business+good business=/=automatically better business, and that is particularly true when the two have virtually no overlap beyond "vague tech connection and make money". All this acquisition would do is waste time and money for very little gain. I could *maybe* see a partnership going somewhere, but again, considering that games aren't even remotely Apple's domain, this is just totally unfounded.
 
Oct 28, 2017
1,766
Sounds like a terrible idea. probably stifle Nintendo's innovation as well, since Apple have become very stagnant in that regard. I use apple products, but am coming off them. The company has barely innovated in a decade.
 
Dec 17, 2018
289
I would exclude the possibility of a Disney buyout. Disney don't have the funds nor the experience to run a gaming company, I think they would run Xbox or PlayStation to the ground if they ever got a hold of them. They're best suited to media.
 
Oct 27, 2017
1,555
Apple acquiring a company that is very Japanese and is extremely dependent on design innovation from their hardware and software teams working together would be a terrible idea. How would Apple even absorb Nintendo and all its staff into the Apple culture? I think its the last company Apple would want to acquire.
 
Apple will not acquire companies which can't be incorporated smoothly in their ecosystems. That's why they don't care about acquiring companies that are their own thing in consumer markets. Tech companies? Sure. Entertainment companies with their own history in making dedicated devices? Lol.

Nintendo contents under a subscription model wouldn't justify a purchase. That could perfectly work under a partnership.
That's right. Eventually Apple could rent/license stuff around their ARM chip production. Otherwise Sony and Nintendo made the same choice as Apple two decades ago : to use a FreeBSD kernel base for their OS and agglomerate their old software layers on it.
 
Oct 25, 2017
951
With streaming and subscription future coming, sooner or later gaming will be rule by these tech giant anyway.
I don't see how traditional gaming company like Nintendo can compete with them, without the tech or capital.
 
Oct 25, 2017
3,567
Italy
A quick response to some statements in the article.

With Nintendo, Apple would get significant exposure to the large and growing gaming industry, while benefiting from a vast array of potential revenue synergies. Market research firm Newzoo estimates that the global gaming market grew 11%, to $135 billion, last year and projects it could rise to $174 billion by 2021, or about 9% per year. The gaming industry is one of the few remaining verticals that could actually move the needle for Apple.
The gaming industry is growing but the growth is not because of Nintendo, which is still a small fish in a big pond after all. Mobile and PC gaming take the lion's share in industry revenues and Apple is in fact contributing to the growth thanks to smartphone and tablets. If Apple is smart, it should look at PC gaming rather than dedicated devices.

Nintendo owns some of the most valuable videogame franchises in the world—including Mario, Zelda, and Donkey Kong—and has a library of thousands of games across more than three decades in the business. While it continues to turn out wildly popular and well-reviewed games, Nintendo has struggled to gain traction beyond its home consoles. Apple has a few things to offer there: Think iPhone, Apple TV, iPad, and maybe even the Mac.
Nintendo has found some success on mobile and mobile revenues are growing each quarter. Nintendo didn't find traction beyond home consoles and mobile because the company doesn't want to offer its games outside own dedicated devices and smartphone (the latter mostly seen as an advertising strategy to bring players to dedicated devices).

Imagine playing Switch,Super Nintendo, or old NES classics on any Apple TV or iPad with the simple addition of a wireless Bluetooth controller. Conveniently, the latest iOS devices use the same ARM-based processor chip technology found in Nintendo’s Switch, making software conversions much easier.
It's very naif thinking that would justify an acquisition. The idea is nice but a partnership would work better.

Apple could help Nintendo aggressively scale its Nintendo Switch Online paid subscription business, which enables robust multiplayer online services and access to a classic games library. All told, Apple’s ecosystem powers 1.4 billion active devices.
Why should Apple acquire a company to help it running better a service on the latter's dedicated device? Not even clear how 1.4b active Apple devices should help Nintendo running NSO as long as Nintendo keeps its own dedicated devices. Synergies might occur regardless.

The company could also increase Nintendo’s development of smartphone games. Morgan Stanley estimates that more than 70% of App Store spending is tied to game-related apps.
Not clear how. Apple doesn't develop games. Apple provides a platform where those games are sold and run.

Nintendo content, meanwhile, would help Apple drive engagement, recurring revenue, and customer satisfaction, all while boosting demand for Apple hardware.
1. Nintendo contents help Apple anyway as Apple gets a 30% cut on all purchases on App Store and Nintendo already releases games on App Store;
2. Boosting demand for Apple hardware implies that Nintendo contents would be exclusive to Apple devices which would limit A LOT Nintendo business; Nintendo would prefer to release smartphone games on both App Store and Google Play;
3. games would boost demand for Apple hardware as long as Apple hardware are sold as gaming devices which is not the case.

Nintendo has a market value of $34 billion, but Nintendo is conservative with its capital and has approximately $9.6 billion in net cash. That gives the company an enterprise value of about $24 billion. If Apple offered a 50% premium to Nintendo’s market value—a deal that Nintendo would have to consider—the price tag would come to roughly $40 billion.

That’s still cheap. As recently as a year ago, Nintendo had a market value of $55 billion. If a full acquisition can’t be consummated, a large equity stake or strategic partnership could also work for both companies.
Cheap by which metrics? 🙄 It would be one of the largest acquisition ever for a tech company. SoftBank bought ARM for $32b. Comcast acquired Sky for $39b.

Apple can learn from Microsoft (MSFT), the company that surpassed it in market value late last year. The software giant jumped into videogames with the Xbox in 2001, a platform that has morphed into a major online service.
Apply can learn acquiring companies to enter the video game industry from Microsoft which entered in the video game industry by NOT acquiring companies...? 😂 Same goes for Sony. Sony started a partnership with Nintendo but then went solo. Both Microsoft and Sony entered the industry using partnership and deals with publishers.

Take Nintendo’s content and Apple’s scale and the combined company could quickly jump ahead of Microsoft and Sony (6758.Japn) Today, investors value Microsoft at 22 times estimated 2019 earnings, while Apple trades at just over 12 times, thanks to its hardware-centric perception.
Microsoft good outlook is not mainly due to gaming but to cloud computing and services.
 
Oct 29, 2017
777
Selling out to a foreign company wasn't even ever thought of
I truly believe Apple purchasing or entering a strategic partnership with Nintendo would be a great move for Apple. Nintendo is extremely profitable and has some of best sustainable game franchises that can be monetized for future services offerings.

Compared to other potential targets, Nintendo is also reasonably priced.

Disclosure: I wrote the column in OP.
"Apple could help Nintendo aggressively scale its Nintendo Switch Online paid subscription business, which enables robust multiplayer online services and access to a classic games library. "

Is that what Nintendo wants tho? They clearly don't want to lessen their IPs value by making it into a games library, did you pay attention to their handling of games in the past? Selling classics at high value is their m.o.

Nintendo selling out to a foreign company sounds like fan fiction.
 
Oct 27, 2017
5,550
Taiwan
Are you serious?
Nintendo is Japan's national treasure, you think it's just gonna sold to some American company? That's about as likely as Apple sold itself to China's Tencent.
The government would definitely step in.
 
Oct 25, 2017
122
Europe
As if the only way to work together is to buy the other company. That is not how business work. Nintendo can already put their games on Apple Devices when they want. And they could search an extern partner to help with their online service. They don‘t need to be bought for that.
 
Oct 26, 2017
10,748
This is dumb but , If that means Nintendo games will come to mobile then yes lol. But itd have to be one of those situations where Nintendo still operates separately 99% of the time,.
Wake me up when a game of the scale of BotW runs on mobile. Let's not even talk about controls here, because they would be utter shite, no matter how hard NIntendo would try to make them work. I never get wishes like this that obviously won't work.
 
Wake me up when a game of the scale of BotW runs on mobile. Let's not even talk about controls here, because they would be utter shite, no matter how hard NIntendo would try to make them work. I never get wishes like this that obviously won't work.
I was thinking more like pokemon and Mario or older games lmao. It should be obvious that no one is talking about bringing all of the games to mobile or at the same settings that they are on the actual console.
 
Oct 26, 2017
10,748
I was thinking more like pokemon and Mario or older games lmao. It should be obvious that no one is talking about bringing all of the games to mobile or at the same settings that they are on the actual console.
I wouldn't be so sure about that considering a lot of people wanted Nintendo to go third party, completely ignoring what happened to Sega.
And again it's not only settings. How on earth would you make controls for a game like Odyssey for mobile?
Pokemon would work, sure.
 
Dec 18, 2017
2,250
Japan doesn't allow buyouts of Japanese companies by foreign entities. Beyond that, a large portion of the company stock is held by Nintendo employees and loyalists.

Point of Story: No one is buying out Nintendo. It's just not happening.
 
Dec 13, 2017
586
Apple acquiring a company that is very Japanese and is extremely dependent on design innovation from their hardware and software teams working together would be a terrible idea. How would Apple even absorb Nintendo and all its staff into the Apple culture? I think its the last company Apple would want to acquire.
Apple would kill nintendo's hardware business and run the company as an independent subsidiary developing games that run only on apple devices. Apple has tons of devices out there and having nintendo's IP portfolio would add tremendous value to apple's ecosystem. Buying nintendo wouldn't be a problem, they have like $280 billion cash just sitting there and generate $60 billion cash every year.
 
Nintendo is a publicly traded company, but I have no idea if there’s enough shares on the market to achieve ownership, or if the Japanese government would allow a foreign company to make the final purchase. This articles suggestions are dubious.
There are enough shares in free circulation but Japan's anti-hostile takeover laws would make a buyout impossible without Nintendo agreeing to it, which is not going to happen.
 
I wouldn't be so sure about that considering a lot of people wanted Nintendo to go third party, completely ignoring what happened to Sega.
And again it's not only settings. How on earth would you make controls for a game like Odyssey for mobile?
Pokemon would work, sure.
2D/2.5D Mario games and Kart....... I think you're getting me mixed up with your people who have unrealistic expectations lmao. Old Zelda games, Metroid, Star fox, most of the Handheld only games, Pikmin. There's so many games that could work with touch controls.

The people that think Nintendo should go 3rd party just don't want a Nintendo console but still want Nintendo games.
 
Oct 26, 2017
10,748
2D/2.5D Mario games and Kart....... I think you're getting me mixed up with your people who have unrealistic expectations lmao. Old Zelda games, Metroid, Star fox, most of the Handheld only games, Pikmin. There's so many games that could work with touch controls.

The people that think Nintendo should go 3rd party just don't want a Nintendo console but still want Nintendo games.
Pikmin especially would work, yeah. Sure, I get your point.

But to the bolded: The problem with that is ignoring the benefits of Nintendo being a platform holder. No way in hell they would be able to take 5+ years for a Zelda game or come up with risky titles like Splatoon.
But that's offtopic I guess.
 
Feb 28, 2018
733
Not to mention Nintendo is one of the most popular Japanese exports ever, there's no way the Japanese Government would allow it to be bought entirely by some American giant. Nintendo is a national treasure for them.