Famed Wedbush Morgan analyst Michael Pachter has spoken out against Nintendo during the latest edition of his Pach-Attack show. Pachter says that Nintendo president Satoru Iwata is a poor CEO who has ultimately done a terrible job at running the company. His opinions came as part of a segment on the show, where he was asked whether or not Nintendo will leave the hardware business.

“Having to? No, never,” Pachter said. “Wanting to? Not while their biggest shareholder is Mr. Yamauchi who I believe is around 70, 71 years old, and not while Mr. Iwata is CEO. I think those two guys are deeply rooted in tradition in the past, in what made Nintendo great. And I think that the Nintendo formula for success for the last 35 years has been manufacture a console, sell it at a profit, and support console sales with proprietary software. And then when your console sells well, collect royalties from third-parties for the privilege of putting their software on the console.”

However, Pachter believes “that model is broken for Nintendo.

“I think Nintendo is no longer able to compete the way they did in the past and sell their consoles at a big profit,” he continues.

“I think that the Wii, when it first launched they were probably making about $100 of profit per unit. I think the DS when it first launched was probably generating about $50 of profit per unit. The 3DS I think is barely making a profit. The Wii U I think is barely making a profit – I’m talking 5 or 10 bucks per unit.”

“But I don’t think they realise that yet,” he adds. “And that’s a business decision, so this is a criticism of Mr. Iwata, not of Reggie [Fils-Aime, President & COO, Nintendo of America]. Reggie and the marketing team, they’re great, they do what they can. You have to… play with the cards that you are dealt. They’re dealt the Wii U, they’re going to do the best they can to market it and the best they can to get you excited about the software. So I love the US marketing guys, I think they’re phenomenal and I have no problem with any of those guys.”

“I think Mr. Iwata’s a pretty poor CEO,” he continues. “I think he’s done a very poor job running the company. I have a neutral rating on Nintendo, but I have to say only because their cash level supports their current share price. It’s a bad company that doesn’t make money.”

“Your question, will they have to exit the console-making business?,” continued Pachter. “The good news is, Nintendo has something around 8 or 9 billion dollars – billion – of cash on their balance sheet. When they lose money, they lose something like a billion dollars. And frankly, I think next year their losses will be smaller. I think if they lose money it’ll be $100m, $200m. They can run for 50 more years and keep losing money and they’re not going to go out of business. So they aren’t forced to do anything.”

“The stock has dropped to cash value so there’s no value in investing in it. The only way anybody is going to make money going forward is if Nintendo suddenly starts making money, and they’re not going to make money on hardware, not at these prices.”

He continued: “If Nintendo’s business is trying to make a profit, once they conclude they aren’t going to make any money on hardware, of course they should exit the hardware business. And if they were to put their software on multiplatform they would probably sell twice as much software. So I think Nintendo, if they were to follow the SEGA route, would be immensely more profitable, but it’s not in their DNA…

“When Yamauchi no longer is a shareholder [and] Iwata is no longer there, maybe, but I’d say they’re gonna keep fumbling around and keep trying to make money in hardware. Don’t think it’s going to work. I’m not particularly optimistic about an investment in Nintendo stock and I am a stock market guy so I’ve been pretty good about stock market investments.

“If you don’t like that answer, Nintendo fans, deal with it.”

http://mynintendonews.com/2013/03/11/pachter-claims-that-nintendo-is-a-bad-company-with-a-poor-ceo

If i agreed with him, will i get banned?

I agree!!!

He deserves some blame but under him was the DS and the Wii two huge successes. And now 3DS is doing well. 3/4 isn't bad at all

Pachter is trolling hard now.



I agree just in some parts... I think the CEO is weak and the Wii U was a mistake but overall Nintendo is not in trouble or is a bad company.

What Double Standards. (Maybe that's not the best word, but whatever.)

It's hard to read this article without wanting to punch babies. (That part about punching babies was sarcasm, of course...)

Yes and no. There have been success stories under the guy, and the Wii U's fate is yet to be determined. Let's wait and see how things go with the Wii U first.

Pacter is going crazy. How the hell does he expect them to double their sales if they dont have hardware to sell it on also? He said they should stop making hardware then goes on to say their sales will double if they make for other platforms. Neither Sony nor Microsoft made profits on their hardware either so do they exit the hardware business also? Sony is closer to becoming like SEGA than Microsoft or Nintendo so at this point Pacter is just trolling like he always does. No one knew or cared who he was before he started trolling Nintendo fans. He actually has to keep mentioning Nintendo (the company he hates) to stay relevant. If Nintendo goes out of business i assume he will also.

As much as I dislike saying so, currently, he's right.

3DS is doing well in Japan but that's about all I can give Nintendo at the moment. Outside of Japan 3DS sales are soft and WiiU's are atrocious. They are not making money off the hardware, and without strong hardware sales, that negatively impacts software sales. Poor 3rd party support also means less profit.

Iwata was all aces with DS/Wii but now Nintendo has royally screwed up with 3DS/WiiU and that also must be credited to Iwata. I don't forsee either system becoming a big success (3DS will obviously do better than WiiU and will be 'successful' but not to GB/DS levels).

I think Nintendo's IP's are strong enough to support it's own hardware but not at the price points of old. In the days of Real Racing 3 (freedium iOS/Android), Mario Kart seems vastly overpriced at $60. If Nintendo releases an Android based Nintendo system and Nintendo digital games are priced accordingly - $5-$20 (Retail $30-$50) they'll sell in huge numbers.

He's a nob, and wrong 90% of the time......
....but not this time.

Those points a true and valid. They have an old business model, got very lucky with the Wii, and now everything is going tits up for them. Sure, the 3DS is going ok for the moment, but will this continue with smartphones etc? Well I've yet to see the kid with the Galaxy AND 3DS, so I'm going to say not for long.
As for the WiiU, well the poor sales say it all.