Is the Nintendo 3DS Making a Comeback?

By Michael Comeau  NOV 14, 2011 10:20 AM

The Nintendo 3DS has been beaten up by smartphones like the Apple iPhone. But is the 3DS about to stage a comeback?


On Friday, beleaguered video-game maker Nintendo (NTDOY.PK) went on the public-relations offensive to calm investor fears over the fate of its 3DS portable, which has suffered in the face of a booming smartphone-gaming market. (See Smartphone Game Revenue Blows Away Nintendo, Sony.)

Now, if you haven't been following the story, it goes like this:

The 3DS' predecessor, the Nintendo DS, was released in 2004 and went on to sell nearly 150 million units, making it one of the biggest successes in the history of the video-game industry. The 3DS itself was released in February at $250, but due to lukewarm sales, Nintendo announced a 32% price cut to $170 in July. 

If you haven't been reading my stories, I've been quite wary of the 3DS' ability to succeed, primarily because of skyrocketing sales of those aforementioned smartphones. (See: Smartphone Games Likely to Hinder 3DS Success.)

When the original DS hit the market, the smartphone market was relatively tiny, and the Research In Motion (RIMM) and Palm smartphones of the day had small screens and weak graphical capabilities.

Modern Apple (AAPL) and Google (GOOG) Android devices, with their large, high-resolution touchscreens and huge selections of entertaining $0.99 games, have proven to be good enough for the mass market. I'd argue that the 3DS still offers a far better gaming experience, but people just don't care.

So exactly what did Nintendo do on Friday? Well, it released a press release with the curious title "Nintendo 3DS Poised to Surpass First-Year Sales of Nintendo DS" -- and the modesty of that statement says it all.

Here's a key excerpt from the release:

"In its eighth month on the market, the Nintendo 3DS system crossed 1.65 million units sold in the US, according to the NPD Group, which tracks video game sales in the United States. This milestone puts the platform on track to surpass the first-year total of Nintendo DS, the best-selling game platform in US history."

Now, if, let's say, Ford (F) came out and said that 2011 F-150 pickup truck sales were on track to surpass that of 2004's model, would you not laugh?

It's been seven years since the original DS! This is nothing to brag about!

So obviously, it's far too premature to think that the 3DS will "establish a new benchmark for hand-held gaming launches in the United States," as Nintendo declared in the press release.

Unfortunately for Nintendo, the new benchmark for hand-held gaming launches has been set by the likes of Apple and Samsung, whose iPhone 4S and Galaxy S models have sold like gangbusters.

You've heard what I think. But from here on out, I urge investors to watch what people do on planes, trains, and buses. Commuting and travel platforms serve as surprisingly accurate microcosms of the mobile-device market.

As I've mentioned, I've been riding the New York City subway system nearly every day for 18 years, and I've seen the mobile gaming market evolve before my eyes. Nintendo and Sony (SNE) handhelds are out, and smartphones and tablets are in.

If you've observed a different trend, I'd be shocked -- but would love to hear about it in the comments section below.

Twitter: @MichaelComeau

Position in AAPL

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