HappySqurriel on 18 February 2007
stewacide said:
Nintendo is well in he leagues of companies that are obscenely profitable, and have the market-multiple to prove it: MS used to be in this same club but their margins have been taking a beating over the past few years.
The strange thing about Nintendo is that they never seem to leverage their worth, or even their cash, in acquisitions. I suppose this is how they stay so profitable, but you'd think it'd be AWFULLY tempting to go on a buying spree...
"Back in the day" (about 2001) I saw someone do a rough analysis using financial data that demonstrated that Nintendo had the cash to buy Sega based on Sega's projected net worth at the time; one thing that was pointed out is that Nintendo never buys large companies (which explains much of the Rare situation).
People don't notice Nintendo's strategy but I'll explain it to you ...
Nintendo finds reasonably small developers that have potential (Silicone Knights, n-Space, Retro, Factor 5, Rare) and "Woos" them into becoming a second party developer (or in the case of Factor 5 a close third party developer) and attempts to develop their talent. The reason for this is simple, Nintendo is controlled by one family who wants to make money and the return on investment of buying a portion of Retro for (as a guess) 10 Million and developing them into a studio that can produce a game a year that sells 2 Million + copies is much better than buying Sega for $8 Billion (as a guess) and getting a studio that develops 10 games/year that sell less than a million copies.
