Nintendo Co., Ltd’s
(OTC: NTDOY) Wii consistently outperformed other major consoles in 2007
and is expected to do the same this year. The console-maker expects to
sell more Wiis this year than it did in 2007 and has raised its
production twice to 1.8 million units a month – still not enough to
satisfy demand as they continue to sell out soon after hitting store
shelves. Shareholders remain bullish on Nintendo stock, which has
nearly doubled over the past year.
Video games remain the one bright spot in an otherwise rough retail sector. The success of Nintendo’s Wii along with Microsoft’s
(NDAQ: MSFT) “Halo 3” title led to more video games being sold in 2007
than any other year, with sales hitting $17.94 billion. This number is
up 43% from $12.53 billion in 2006. And December – the most
disappointing month for traditional retail – saw sales up 28%
year-over-year. It appears that video games sold well despite consumers
cutting back on spending in other areas.
Nintendo’s most successful product last year was the Nintendo DS,
which was the year’s best selling gaming system with over 8.5 million
units sold. The Wii managed to sell 6.3 million units despite being in
short supply all year. Interestingly, Nintendo has decided to hold the
production on the Wii at 1.8 million units a month despite selling out
nearly every run. Whether this is a good move or a bad one remains to b
e seen.
Meanwhile, the two largest players in the industry continued to
slide. Microsoft’s Xbox 360 sold only 4.6 million units in 2007 with
the help of their blockbuster title “Halo 3”. Meanwhile, PlayStation
lagged behind the rest by failing to break even a million sales despite
its blockbuster franchise hit “Guitar Hero”. Sony recently announced a
cheaper line of consoles in order to help them better compete in the
market against the Xbox.
Overall, the video game industry appears to be immune to any
slowdown in consumer spending. Right now, hardware sales are growing
faster than software, but all companies in the sector are worth
watching. Nintendo remains a pure-play that is experiencing the
greatest success, so may definitely be worth a second look!
Related Companies
Activision, Inc. (ATVI)
Atari, Inc. (ATAR)
Microsoft Corporation (MSFT)