The unexpected surge of Nintendo (OTCPK:NTDOY) has shifted the balance of power, as no clear cut market share winner is apparent yet. Given the uncertainty surrounding the console makers, investments in these names may prove fruitless. There is a real lack of obvious pure-plays outside of Nintendo.
Given Nintendo’s recent run, its luster as a pure play could prove expensive. However, a little known chip maker has positioned itself nicely to benefit from the success of the Nintendo Wii. MoSys Inc. (MOSY).
MoSys licenses IP to chip makers and its memory IP is embedded in each graphics chip in the Nintendo console. MoSys sees about 60 cents of revenues for each console sold. Not a bad clip for a company with little more than 15 million in revenue last Quarter. Add the fact that MoSys operates on ~90% margins, and you can see the benefit to earnings for MoSys.
This little known semi company has created a nice little niche for itself in the embedded memory system-on-a-chip market, a fast growing chips segment that is heavily used in consumer electronics. Given its attractive windfall from the surging Nintendo popularity, and its bright growth prospects moving into next year, MoSys makes for an interesting play on the under appreciated consumer electronic and semi segments. And more importantly, a pure play on Nintendo popularity.
Disclosure: Author is long Mosys
MOSY 1-yr chart