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.
