Nintendo's value surges ahead of Sony
Tuesday, 26 June 2007
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Nintendo's market value has surpassed that of Sony on the Japanese stock market for the first time, another point scored against its arch-rival in the console wars between the Nintendo Wii and Sony's PlayStation 3.
Games publishers have been scrambling to commit resources to developing titles for the Wii after underestimating the early success of the console, which has won plaudits for a remote control "wand" that allows gamers to mimic sword-fighting or using a tennis racquet.
Nintendo has sold 5.8 million Wiis since launch last November, and last month was outselling the PS3 by two to one in the US and three to one in Japan, leading analysts to predict a virtual spiral of new games releases and increasing demand for consoles.
Nintendo shares rose as high as 46,350 yen (£187.65), a record, boosting its market value to 6.57 trillion yen and narrowly surpassing Sony's market capitalisation for a time, before settling lower. The achievement is extraordinary because, where Nintendo is a pure gaming company, Sony is a multinational entertainment and consumer electronics conglomerate whose interests run from movie studios to mobile phones.
Annual revenue at Nintendo is about one-eighth of Sony's, but its profit margins are higher because Sony loses money on every PS3 console sold. In addition, the unexpected enthusiasm for the Wii and for Nintendo's market-leading handheld console, the Nintendo DS, has driven demand for the shares. Sony shares have risen 66 per cent over the past two years, but Nintendo's have quadrupled and where Sony is valued at 20 times next year's predicted earnings, Nintendo is on 37 times.
Ed Barton, a video games industry analyst at the market research firm Screen Digest, said that Nintendo is winning customers for the Wii and the DS, whose range of titles includes brain teasers as well as traditional games, who might never have bought a console before.
"Games publishers, some publicly, some privately, have admitted that they were caught on the hop by the success of the Wii and have been madly rejigging their own resources to produce more games for it," Mr Barton said. "After all, unless you are a hardware manufacturer, you look to write for the console that can maximise your games sales."
Sony's hopes of regaining lost ground depend on a games release schedule that is expected to pick up strongly by Christmas, and by adding new PS3 services that highlight how it can be used as a "home entertainment hub".
