Just Sarin

a nice article on the new nintendo gaming systems taking on
competition from the competing consoles, taken from the motley fool
news letter.

---------- Forwarded message ----------
From: The Motley Fool <Fool@foolsubs.com>
Date: Sep 28, 2006 3:13 AM
Subject: Save Us, Nintendo
To: sarinsuares@gmail.com

Save Us, Nintendo
By Rick Aristotle Munarriz (TMFBreakerRick)

When you're in third place, nobody takes you seriously. In the case of
Nintendo (OTC BB: NTDOY.PK) and its risky Wii console, things are only
made worse by the fact that you are putting out a console that lacks
the DVD gadgetry of its larger competitors and is being marketed
around quirky controllers and motion-activated gameplay.

Oh, and don't get me started on that ridiculous name. Wii? As in "Wii"
couldn't think of a better name? As in "Wii" know that owners are
going to be hit with size and overflowing bladder jokes?

However, if you take the time to do more than just laugh at the tea
leaves, this may actually be Nintendo's best chance to matter on the
console side. Quite frankly, it may be its last chance, too.

Three's company, so who's the Tripper?
Over the years, the industry has shown a knack for granting no more
than two consoles a fighting chance at any given time. Atari and
Intellivision were doing fine in the early 1980s until ColecoVision
crashed the party. Then you had Nintendo and Sega own the next few
console generations, easily vanquishing systems like 3DO and Atari's
Jaguar.

The elasticity of that theory was stretched when Microsoft (Nasdaq:
MSFT) rolled out its Xbox in 2001. At that point, Sony (NYSE: SNE)
owned the market with its PlayStation and had introduced the
PlayStation 2 a year earlier. Nintendo was the distant silver
medallist in the process of upgrading its gamers to the GameCube
platform.

Microsoft's introduction came at Nintendo's expense as Sony was able
to own two-thirds of the global market. However, with Microsoft and
Nintendo running neck and neck domestically, the industry was able to
absorb all three players as legitimate standards. Game publishers were
left with little choice but to service all three systems, even though
both Microsoft and Nintendo made sure that they had their own
proprietary "must have" franchises to keep their owners loyal.

Four years ago, I suggested that Nintendo drop out of the console race
and stick to its handheld and software strongholds. I don't see it
that way anymore. In fact, even though Nintendo is taking some pretty
risky chances in launching a revolutionary system, I think the climate
couldn't be better for Nintendo.

However, before digging into the prospects of Nintendo, it's important
to explore why the Xbox 360 and PlayStation 3 are vulnerable.

Even giants see their game screens freeze from time to time
I'm one unhappy camper when it comes to my Xbox 360. I had to ship it
out to McAllen, Texas, two weeks ago when I got the dreaded "three red
flashing lights" hardware failure error.

It's a common flaw. Microsoft even has an entire page devoted to it,
and it's also one of the prompts on its customer service line. I've
owned just about every major console since I was old enough to earn an
allowance, and this is the first one that went bonkers on me within
the first year of ownership. Thanks to what I see as a pretty skimpy
warranty -- and my boneheaded ways for not looking into an extended
warranty -- I'm out $139 plus shipping. I still don't know if I'll be
getting my original unlucky machine back or some other refurbished
reject, but at this point, my faith in Microsoft is about as buggy as
my 360.

Naturally, I reserve the right to change my mind once Halo 3 hits
stores next year. Until then, I'll just gripe about seeing red
(literally) and feeling gypped after overpaying for software titles
that don't offer a whole lot more than their sixth-generation
versions.

Then we have the PS3. The company has teased gamers with product
delays. Now, a problem with its Blu-ray drive finds the company nearly
halving the number of units it expects to have on the market in time
for this year's holiday selling season. The price tag -- at $499 to
$599 -- is also steep given the limited resources of younger gamers.

In short, there's a reason why many of the companies presenting at the
Merrill Lynch Media & Entertainment Conference earlier this month
expressed a surprising healthy market for the PS2.

"Sony has talked about this PlayStation 2 cycle having -- I don't know
-- five more years to it," Electronic Arts (Nasdaq: ERTS) CFO Warren
Jenson said during the conference. "It's going to be around for a long
time."

In other words, the PS3 is going to be a slow gainer. It really
doesn't have much of a choice given its production snafus, but the
high price is going to make it appealing more to upscale celluloid
junkies than actual gamers for another year or two when the price
starts to drop.

At half the price of the PS3, and ready to fill the retail channels
with nearly twice as much product, Nintendo has the perfect chance to
matter again.

Wii the people
So are couch potato gaming fiends ready to get moving to make the most
out of their new games? It's an odd proposition until you walk into
the arcade and see folks playing Dance Dance Revolution. That can
sometimes rival even the most ardent of aerobic workouts.

Even though folks will be able to enjoy their Wii games in the more
conventional vegetative state, won't the active gameplay elements win
over parents who worry that their kids aren't getting enough exercise
by spending way too much time staring at their television screens and
computer monitors?

You bet. Childhood obesity is the real deal. Even McDonald's (NYSE:
MCD) is feeling a guilty conscience these days as it seeks to motivate
the Happy Meal crowd to embrace physical fitness.

Even if you're jaded and argue that kids will rebel against their
parents, there's got to be something in a new parental mindset that
will encourage video game playing and the guilt-free purchase of new
software titles.

Nintendo has already proven that it can rework the market with the
success of the touch screen and voice-activated Nintendo DS. It has
opened up the portable market to the cerebral with Brain Age and Big
Brain Academy, as well as the pet-loving Nintendogs set.

Nintendo won't catch up to Sony, but it can certainly help close the
gap with a successful Wii rollout. Because the PS2 is in ample supply
at the $129 price point, the Wii marketing message shouldn't be based
on the value proposition relative to the PS3 and Xbox 360. In reality,
the Wii will be duking it out over the holidays with PS2 and
second-hand systems being sold at GameStop (NYSE: GME) more than the
scarce and pricey PS3. That's where Nintendo needs to pitch its
revolutionary controller and evolutionary gameplay.

If this is Nintendo's last hurrah in the console market, it couldn't
ask for better playing conditions. If it plays its cards right and the
competition continue to play theirs wrong, Nintendo may very well
overcome its ill-advised name.

Electronic Arts and Gamestop are Motley Fool Stock Advisor newsletter
service recommendations. Microsoft is a Motley Fool Inside Value
selection. Try out these or any other Foolish newsletter free for 30
days.

Longtime Fool contributor Rick Munarriz has been a fan of video games
dating back to Pong. He does not own shares in any of the companies in
this story. He is also part of the Rule Breakers newsletter research
team, seeking out tomorrow's ultimate growth stocks a day early. The
Fool has a disclosure policy.