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Nintendo shares leap on 3DS optimism

Nintendo shares leap on 3DS optimism

By Agence France Presse | Updated: 5 June 2012 01:54 IST

Highlights

Nintendo shares surged amid hopes that its struggling 3DS console would finally take off following a price cut

Nintendo shares surged on Tuesday amid hopes that its struggling 3DS console would finally take off following a price cut and on expectations of new game titles for the upcoming Christmas season.

The jump came after the Japanese videogame giant announced its dedicated trade show for September, which is typically holds annually.

The company last month said it would slash by up to 40 percent the price of its new handheld console that offers 3D gameplay without the need for special glasses, after sales slowed in April-June.

Nintendo shares gained 8.44 percent to 13,100 yen on the Osaka Securities Exchange Tuesday, still well off the 25,000 level its shares traded at in mid-February ahead of the 3DS launch.

The company last month slashed its annual net profit forecast 82 percent, amid worries over its business model.

"Some in the market believe as we do that the stock has overshot to the downside, and see the current price level as presenting an opportunity to build a position before the big title releases for 3DS for the holiday," said Jay Defibaugh, director of equity research with MF Global in Tokyo.

He added that this, along with the lower price of the 3DS hardware, should lead to an improved outlook for the struggling console ahead of big software releases such as Mario Kart 7 and Super Mario 3D Land.

"Some in the market are also considering the possibility that Nintendo will reveal another major title in the short-term pipeline or perhaps new community or network functions for the 3DS," said Defibaugh.

According to Japanese videogame magazine publisher Enterbrain, Nintendo sold 214,821 3DS machines in Japan during the August 8-14 period, the second-strongest weekly sales number after the initial launch week in late February, Dow Jones Newswires reported.

The faces tough competition from smartphones and tablets such as Apple's iPhone and iPad, onto which cheap or even free games can be quickly downloaded and played.

The 3DS, the Japanese firm's most important gaming device this year, had seen lacklustre sales that prompted Nintendo to slash its price last month, taken as a signal by the firm that the device had failed to take off.

In June the company unveiled its Wii U, the follow up to the successful Wii that brought motion-sensing gaming to the mainstream.

Some fear that the new product may not be able to retain the audience first captured by the Wii as more people migrate to games on smartphones and social networking sites such as Facebook.

Rovio Inc's "Angry Birds" and Facebook games such as Zynga Inc's "FarmVille" are particular examples of how the market has changed since Nintendo launched the DS in 2004, say analysts.

However, Defibaugh said that in the aftermath of search-giant Google's $12.5 billion purchase of Motorola Mobility, "investors seem to accord very little to Nintendo's intellectual property, including a massive content library and valuable franchises, and world-class software development capability" in the light of its current share price.

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Further reading: 3DS console, Nintendo, Rovio Inc, Zynga Inc

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