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I think how they should use the money is not a valid question. It displays the same misunderstanding of a market economy as the idea that Microsoft with all of its cash should outspend its competitors.

In an theoretical world Nintendo wouldn't have the cash but its shareholders. They could either decide if Nintendo could use this cash and create a decent return on investment by investing it or if they could get more profit by investing it elsewhere. Likewise if Nintendo had an expansion plan that promised lots of money which they didn't have they would go to a bank or their shareholders to get the money for this.

But of course we are in a practical world so money a company has is far easier to keep than to get new one.