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Experts Ponder the Future of the Wii U. Part 1: Industry Analysts

Some Finance Guys Make Educated Guesses

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In the world of finance, there are people called industry analysts whose job is to tell investors how successful various companies will be. With the upcoming launch of Nintendo’s Wii U, these analysts are offering opinions of whether the console will make Nintendo richer or poorer. Here’s a look at what the “experts” are saying.

Michael J. Olson and Andrew D. Connor of Piper Jaffray predict that the Wii U will only sell a third what the Wii did in its first year, but then, they expect the next consoles from Microsoft and Sony to halve their predecessors sales as well. While part of their issue with the Wii U is its “disappointing” hardware specs, their pessimism is mainly centered around competition from “social/mobile gaming.” They seem to believe that console gaming is simply dying a slow, lingering death.

David Gibson of Macquarie Capital Securities is telling investors not to buy any Nintendo stock, at least until the video game industry convention E3, but his recommendation is based on a lot of rumor and conjecture. He believes the Wii U’s graphics power will be below that of the PS3 and 360, which may or may not be true, that Call of Duty won’t make it to the Wii U, which is highly unlikely, and that both Sony and Microsoft will release their next consoles by the end of 2013. He also says Apple may add a controller to its iPhone and iPad that will woo gamers. His forecast indicates just how much of industry analysis is made up of rumor-fueled guessing.

Unlike Gibson, Colin Sebastian of RW Baird doesn’t want to offer too many concrete opinions until all the facts are in, but says the Wii U could sell at $300 if its graphics are of PS3/360 quality. Still, he is not convinced a tablet controller is a “killer app,” and believes Nintendo needs to catch up in online services.

Ted Pollak of Jon Peddie Research is cautiously optimistic about the Wii U’s chance for success, believing that predictions of Nintendo’s doom simply reflect the unpredictability of their unique approach. "Technology changes and Nintendo looks like they are falling behind [but] they actually have a smart technology strategy that most people don't detect." He says the Wii U can succeed, but it will need a number of solid launch titles.

Pietro Macchiarella of Parks Associates has little hope that Nintendo can bring core gamers to the Wii U; he expects they will wait for the next Microsoft and Sony consoles. He feels that " a console on par with current generation consoles will be enough to make it appealing to the same people who bought the Wii,” but feels those people, who are predominately casual gamers, are unlikely to pay $300 for a console when they can play games on smart phones and tablets instead. These casual gamers will only buy a Wii U if “they find something really unique about it."

For the most part, analysts are wary of the Wii U, feeling it will struggle to gain market share before Microsoft and Sony release their next consoles, that it’s a tough sell for core gamers and that smart phones and tablets are eating away at console gaming’s popularity. But they also acknowledge Nintendo’s reputation for great games, and some will admit that it’s difficult to predict the success of a company that plays by its own rules.

Some predictions will prove right, some will prove wrong. The analysts who are right will say, “I told you so,” and those who are wrong will, like the many who predicted the Wii was an insane mistake destined to fail in the face of more technologically powerful competitors, pretend they never said anything about it at all. These are nothing but educated guesses; and these analysts are fortunate if their predictions are more accurate than those of a Magic 8 Ball.

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