During its first week on sale in the United States, Wii U from Nintendo ADR (NASDAQOTH: NTDOY) sold more than 400,000 units. This is far less than the original Wii, which sold 600,000 units in its first 8 days on sale. No wonder many Wall Street analysts said that the 400,000 figure was disappointing. But is it really? It may not be, because the video console gaming landscape has changed drastically in the last few years.
The introduction of the Wii U is obviously important to Nintendo. It is trying to revive its flagging sales. . .sales that led the company to report its first annual loss in five decades as a public company. Nintendo has been especially hurt by poor sales of its handheld 3DS gaming device.
The original Wii to date has sold approximately 97 million units, the best of its generation. Its competitors – the Xbox 360 from Microsoft (Nasdaq: MSFT) and the Playstation 3 from Sony ADR (NYSE: SNE) – have sold about 70 million units each to date.
The Wii U
Nintendo is hoping to get back its mojo with the Wii U and its GamePad controller that has a 6.2 inch touchscreen imbedded in it. This not only allows a different view of the game but also permits users to transfer, if they wish, a game on the TV to the controller. This allows a game to be played on just a handheld device.
The Wii U also offers HD-quality gaming as well as online gaming. This matches its rivals and should encourage games publishers including Activision to release some of the most popular games on the Wii U, such as Call of Duty: Black Ops 2. But so far, only games publisher Ubisoft seems willing to promote its game on Wii U. This may leave Wii U with a limited selection of games and not many of the best selling games.
Changed Gaming Landscape
The Wii U is also vitally important to the video console as a whole. This launch served as the introduction to the eighth generation of the traditional video game console. The previous cycle was kicked off seven years ago by Microsoft and its Xbox 360. The worry in the industry is that this may be the final generation of video game consoles.
These worries are centered around the fact that the gaming world is very different from the one that Microsoft launched the Xbox 360 into. Back then Facebook social gaming, smart TVs, smartphones and tablets from Apple and others were not a threat. But they are today.
As Piers Harding-Rolls, head of games at research company IHS Screen Digest, told the Financial Times “It's a much more competitive landscape. The question is whether Wii U. . .has enough selling points to elevate it to being a device that consumers will see themselves purchasing and engaging with on a daily basis?”
It is right to be concerned about the industry, but don't bury it yet.
Nintendo's Future
Despite all the concerns, Nintendo will have a rather successful launch of the Wii U. The company should still be able to hit its target of 5.5 million units sold by the end of its fiscal year in March 2013.
However, late next year will see fresh competition for the Wii U as both Sony and Microsoft come out with their new consoles. Sony's next game console will be the Playstation 4 or perhaps Playstation Orbis. Microsoft' offering will be the Xbox 720.
Early talk among analysts about the competition between the three consoles is that Microsoft's Xbox 720 will be the winner. Doug Creutz, analyst at Cowen & Company, told the Financial Times that Microsoft's superior media content and services will give it a clear edge.
But the question remains whether there will ever be a big “winner” again in the video game console industry in the true sense of the world.
This article originally appeared on the Motley Fool Blog Network. Please be sure to read all of my Motley Fool articles at http://beta.fool.com/tdalmoe/.
Wednesday, December 5, 2012
Tuesday, November 20, 2012
Qualcomm On the Rise, Intel On the Decline
The latest quarterly earnings statement from Qualcomm (Nasdaq: QCOM) blew away most estimates. This resulted in the company's stock actually briefly surpassing the market valuation of long-time chip champion, Intel (Nasdaq: INTC). This is not a blip. There are reasons why investors should expect this to be the continuation of a long-term trend where Qualcomm outperforms Intel.
Qualcomm had such a good quarter because it is largest seller of semiconductors for mobile phones, including the iPhone 5 from Apple (Nasdaq: AAPL) and the latest offerings from Samsung like the Galaxy S III. It is also a big player in chips for tablets. The majority of the company's revenues comes from baseband chips, which connect phones to cellular networks. These chips are sold to firms like Apple and Samsung.
Mike Burton, an analyst at Brean Capital LLC, said “Qualcomm has absolutely been one of the prime beneficiaries in smartphones and tablets.” Meanwhile, Intel is a laggard in the market for mobile phone chips and is being hurt by the steady decline in demand for PCs. PC shipments are headed for their first annual decline in 11 years this year, according to research firm IHS iSuppli.
Qualcomm's chips are based on designs from Intel's adversary, U.K.-based Arm Holdings PLC ADR (Nasdaq: ARMH). Arm designs chips that use much less power than Intel chips while still being powerful. In fact, Bloomberg has reported that Apple is even considering dumping Intel's chips from use in its MAC computers in favor of Arm-designed chips.
Clear Sailing in 2013
More good news for Qualcomm shareholders is the fact that the company forecast continued strong demand for its chips in the current quarter. Qualcomm pointed to factors such as fast-growing demand for smartphones among emerging market consumers. Qualcomm's CEO Paul Jacobs told the Financial Times “Smartphones in China are really strong right now and cell phones are staples, not luxury items any more.”
Despite a bit of a slowdown in the sales growth rate in the third quarter, the future is bright for smartphones. Research firm NPD Display Search says that 567 million smartphones will be shipped this year and that number will surpass 1 billion in 2016.
Qualcomm is not sitting on its laurels either. It is aggressively expanding into the market for application processors. These are the chips that run programs in smartphones and tablets. For example, the company will be supplying its Snapdragon product to computer makers using the new version of the Windows operating system, Windows 8, from Microsoft (Nasdaq: MSFT). Snapdragon is also the sole supplier being used by every manufacturer of Windows smartphones.
The Years Ahead
This move into application processors is not surprising. Qualcomm was quick to enter the mobile phone market too. Its president Steve Mollenkopf told the Financial Times “We saw that mobile was going to be the key market to be in some time ago and we invested in key technologies much earlier than everybody else.” Particularly Intel, which is still talking about a golden age for PCs.
In the years ahead, if current trends continue, Qualcomm will be a more valuable company than Intel.
Look at the past decade. Intel's valuation peaked at $502 billion in 2000 during the internet bubble. Its shares have fallen about 15% this year alone and about 14% over the past 10 years. Meanwhile, shares of Qualcomm have jumped about 255% over the past decade and are up roughly 8% this year.
The next decade will likely show an ever growing gap between the two companies fortunes.
This article was originally published on the Motley Fool Blog Network. Be sure to read all of my articles for the Motley Foll at http://beta.fool.com/tdalmoe/.
Qualcomm had such a good quarter because it is largest seller of semiconductors for mobile phones, including the iPhone 5 from Apple (Nasdaq: AAPL) and the latest offerings from Samsung like the Galaxy S III. It is also a big player in chips for tablets. The majority of the company's revenues comes from baseband chips, which connect phones to cellular networks. These chips are sold to firms like Apple and Samsung.
Mike Burton, an analyst at Brean Capital LLC, said “Qualcomm has absolutely been one of the prime beneficiaries in smartphones and tablets.” Meanwhile, Intel is a laggard in the market for mobile phone chips and is being hurt by the steady decline in demand for PCs. PC shipments are headed for their first annual decline in 11 years this year, according to research firm IHS iSuppli.
Qualcomm's chips are based on designs from Intel's adversary, U.K.-based Arm Holdings PLC ADR (Nasdaq: ARMH). Arm designs chips that use much less power than Intel chips while still being powerful. In fact, Bloomberg has reported that Apple is even considering dumping Intel's chips from use in its MAC computers in favor of Arm-designed chips.
Clear Sailing in 2013
More good news for Qualcomm shareholders is the fact that the company forecast continued strong demand for its chips in the current quarter. Qualcomm pointed to factors such as fast-growing demand for smartphones among emerging market consumers. Qualcomm's CEO Paul Jacobs told the Financial Times “Smartphones in China are really strong right now and cell phones are staples, not luxury items any more.”
Despite a bit of a slowdown in the sales growth rate in the third quarter, the future is bright for smartphones. Research firm NPD Display Search says that 567 million smartphones will be shipped this year and that number will surpass 1 billion in 2016.
Qualcomm is not sitting on its laurels either. It is aggressively expanding into the market for application processors. These are the chips that run programs in smartphones and tablets. For example, the company will be supplying its Snapdragon product to computer makers using the new version of the Windows operating system, Windows 8, from Microsoft (Nasdaq: MSFT). Snapdragon is also the sole supplier being used by every manufacturer of Windows smartphones.
The Years Ahead
This move into application processors is not surprising. Qualcomm was quick to enter the mobile phone market too. Its president Steve Mollenkopf told the Financial Times “We saw that mobile was going to be the key market to be in some time ago and we invested in key technologies much earlier than everybody else.” Particularly Intel, which is still talking about a golden age for PCs.
In the years ahead, if current trends continue, Qualcomm will be a more valuable company than Intel.
Look at the past decade. Intel's valuation peaked at $502 billion in 2000 during the internet bubble. Its shares have fallen about 15% this year alone and about 14% over the past 10 years. Meanwhile, shares of Qualcomm have jumped about 255% over the past decade and are up roughly 8% this year.
The next decade will likely show an ever growing gap between the two companies fortunes.
This article was originally published on the Motley Fool Blog Network. Be sure to read all of my articles for the Motley Foll at http://beta.fool.com/tdalmoe/.
Thursday, November 8, 2012
Nokia May Be at the 'Last Chance Saloon'
The ills of the once dominant Finnish mobile phone maker Nokia ADR (NYSE: NOK) are many and, to some extent, getting worse. The company may be at 'The Last Chance Saloon.' The bartender is Steve Ballmer of Microsoft (Nasdaq: MSFT). He is pouring Nokia not the Finnish traditional 'long drink', but what he hopes is a nice, smooth and profitable drink of Windows 8 for smartphones.
Windows 8 had better be all that Microsoft has promised for Nokia's sake. It sold fewer of its flagship Lumia smartphones in the third quarter than Apple (Nasdaq: AAPL) did of its new iPhone 5 in its opening weekend!
Poor Sales and Market Share Trend Continues
Nokia's smartphone sales in the third quarter amounted to just 6.3 million units. There were 2.9 million Lumias sold in the quarter, down from 4 million the previous quarter. In the important U.S. market, sales amounted to a mere 300,000 smartphones. That is down about 50% from the previous quarter. In addition, revenues in China fell 80% year-on-year. Much of the blame lies with the fact that consumers globally were waiting for the Lumia smartphones that run on the new Windows 8.
Right now the Windows operating system accounts for only 4% of the global smartphone market, badly trailing Apple's iOS and the Android operating system from Google (Nasdaq: GOOG). Samsung's new Galaxy III runs on Android. That's just another reason it wasn't a great shock that Nokia was bumped out of the top 5 smartphone makers in the third quarter. That was the first time that happened since researchers at IDC began compiling such data in 2004.
Sales are unlikely to improve as much as initially expected in the short term either. This quarter is traditionally the strongest for sales of phones due to the holiday season. However, for Nokia, the flagship 920 Lumia smartphone will not be available for several more weeks. It will also be available only through one carrier, AT&T. This combination will likely hold back sales despite Nokia's market-leading mapping and photo technology.
Carriers Want an Alternative
There is one huge positive in the corner of Nokia and Microsoft though. The telecom carriers such as AT&T, Sprint, T-Mobile and Verizon (NYSE: VZ) want a viable third choice to the current duopoly of Apple and Google.
Verizon's CEO, Lowell McAdam, told the Financial Times recently that “the carriers are beginning to coalesce around the need for a third ecosystem. It'll between [Blackberry maker] RIM (Research in Motion) and Microsoft, and I expect Microsoft to come out victorious.”
He may be right about Microsoft beating out RIM. According to the consumer research firm Kantar Worldwide, in Europe, Windows will overtake RIM's operating system by the end of the year. Nokia's entry-level smartphone Lumia 610 seems to be winning over cost-conscious consumers there. In a first for Windows, it now has more than 10% of the market in Italy.
The Future
Europe could prove to be very fertile ground for Nokia and Microsoft since more than 50% of European consumers have yet to purchase their first smartphone and still have older phones. The brand these consumers is most familiar with is Nokia.
Another plus is that the launch of Windows 8 should give an impetus to developers to build applications and content that is currently lacking on Windows phones. The myriad of apps and content is a huge selling point for Apple.
But getting that content is a slow process and Nokia may not have the luxury of waiting too long. It is burning through its cash position rather rapidly thanks to its continuing operating losses. Standard and Poor's has forecast that, by year's end, Nokia will be down to 3 billion euros in cash. Some credit analysts even doubt whether the company can make a 1.25 billion euro bond repayment in April 2014.
So the Windows 8 effect had better kick in and fast. The next six to nine months will be critical to the fate of Nokia.
This article was originally published on the Motley Fool Blog Network. Make sure to read all of my articles for the Motley Fool at http://beta.fool.com/tdalmoe/.
Windows 8 had better be all that Microsoft has promised for Nokia's sake. It sold fewer of its flagship Lumia smartphones in the third quarter than Apple (Nasdaq: AAPL) did of its new iPhone 5 in its opening weekend!
Poor Sales and Market Share Trend Continues
Nokia's smartphone sales in the third quarter amounted to just 6.3 million units. There were 2.9 million Lumias sold in the quarter, down from 4 million the previous quarter. In the important U.S. market, sales amounted to a mere 300,000 smartphones. That is down about 50% from the previous quarter. In addition, revenues in China fell 80% year-on-year. Much of the blame lies with the fact that consumers globally were waiting for the Lumia smartphones that run on the new Windows 8.
Right now the Windows operating system accounts for only 4% of the global smartphone market, badly trailing Apple's iOS and the Android operating system from Google (Nasdaq: GOOG). Samsung's new Galaxy III runs on Android. That's just another reason it wasn't a great shock that Nokia was bumped out of the top 5 smartphone makers in the third quarter. That was the first time that happened since researchers at IDC began compiling such data in 2004.
Sales are unlikely to improve as much as initially expected in the short term either. This quarter is traditionally the strongest for sales of phones due to the holiday season. However, for Nokia, the flagship 920 Lumia smartphone will not be available for several more weeks. It will also be available only through one carrier, AT&T. This combination will likely hold back sales despite Nokia's market-leading mapping and photo technology.
Carriers Want an Alternative
There is one huge positive in the corner of Nokia and Microsoft though. The telecom carriers such as AT&T, Sprint, T-Mobile and Verizon (NYSE: VZ) want a viable third choice to the current duopoly of Apple and Google.
Verizon's CEO, Lowell McAdam, told the Financial Times recently that “the carriers are beginning to coalesce around the need for a third ecosystem. It'll between [Blackberry maker] RIM (Research in Motion) and Microsoft, and I expect Microsoft to come out victorious.”
He may be right about Microsoft beating out RIM. According to the consumer research firm Kantar Worldwide, in Europe, Windows will overtake RIM's operating system by the end of the year. Nokia's entry-level smartphone Lumia 610 seems to be winning over cost-conscious consumers there. In a first for Windows, it now has more than 10% of the market in Italy.
The Future
Europe could prove to be very fertile ground for Nokia and Microsoft since more than 50% of European consumers have yet to purchase their first smartphone and still have older phones. The brand these consumers is most familiar with is Nokia.
Another plus is that the launch of Windows 8 should give an impetus to developers to build applications and content that is currently lacking on Windows phones. The myriad of apps and content is a huge selling point for Apple.
But getting that content is a slow process and Nokia may not have the luxury of waiting too long. It is burning through its cash position rather rapidly thanks to its continuing operating losses. Standard and Poor's has forecast that, by year's end, Nokia will be down to 3 billion euros in cash. Some credit analysts even doubt whether the company can make a 1.25 billion euro bond repayment in April 2014.
So the Windows 8 effect had better kick in and fast. The next six to nine months will be critical to the fate of Nokia.
This article was originally published on the Motley Fool Blog Network. Make sure to read all of my articles for the Motley Fool at http://beta.fool.com/tdalmoe/.
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