Why Apple Should Buy Nintendo

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 |  Includes: AAPL, NTDOY
by: Ivan Jimenez

Nintendo (OTCPK:NTDOY) and Apple (NASDAQ:AAPL) are two leading companies that have each revolutionized their respective markets with the introduction of innovative and fun to use devices. Nintendo, a leader in the gaming industry, has sold more than 146 million Nintendo DS devices and 86 millions Nintendo Wii devices, while Apple, a leader in the computer industry, has sold over 100 million iPhones and 25 million iPads.

These two companies share many similarities; they both run a closed hardware environments, and they both enjoy a very loyal customer base. It is my belief that combining Nintendo’s customer base with Apple’s would be highly profitable and beneficial for both companies. Nintendo would complement Apple nicely by giving Apple a popular gaming platform while Apple could complement Nintendo by turning the Nintendo Wii into a true entrainment hub where all your music, videos and media is purchased and stored. Bringing Nintendo to the table could introduce millions of Nintendo customers to the iTunes ecosystem.

Nintendo recently unveiled the Nintendo Wii U prototype. Nintendo intends to make the Nintendo Wii U the center of digital media in the living room. Apple too has been trying to become the center of digital entertainment in the living room with Apple TV. Apple TV is a digital media receiver set-top box that can receive media from the internet via iTunes or from a computer; but it can also stream media from an iOS device by the use of Apple’s wireless protocol AirPlay.

AirPlay not only does wireless streaming with iOS devices, but with iOS 5, it can also do mirroring. With mirroring you can display on your TV anything that you view in your iOS devices; this is great if you want to play Angry Birds in a large screen. But neither Nintendo nor Apple has what it takes to be the center hub of digital entertainment in the living room. Apple lacks a gaming platform, without it, Apple will have to share the living room with a gaming device like Sony’s (NYSE:SNE) PlayStation or Microsoft’s (NASDAQ:MSFT) Xbox. Nintendo lacks wireless media streaming technology and content. A combination of both devices would be the ultimate solution.

Lately, Nintendo has fallen behind Sony’s PlayStation and Microsoft’s Xbox in the technology race; both the PlayStation and the Xbox support better graphics than the Nintendo Wii, but Nintendo maintains its competitive edge by providing a more aggressive pricing and an amazing game play; games like Zelda, Super Mario, and Pokémon are all time favorites and exclusive to the Nintendo platform. Apple, an expert in computer hardware, could help Nintendo catch up in the technology race.

Legally, there shouldn’t be any antitrust problems if Apple buys Nintendo because they don’t actually compete against each other. During an interview, Nintendo’s CEO Satoru Iwata remarked that if Apple and Nintendo

were in direct competition, I would not use a Mac in my presentations.

The features of the iPhone and the DSi may overlap. But if we look at our differences, the areas of overlap are small. If, in the future, this overlap becomes bigger to the extent we should call it direct competition, I have to be more careful. I can't bring out the iPhone during an interview anymore. Today, I don't worry about it.

Yes, Nintendo’s CEO uses an iPhone and a Mac.

I think that a Nintendo Apple merger would be a win-win situation for both companies and it would give Apple and Nintendo a better edge against their mutual nemesis Microsoft.

Disclosure: I am long AAPL.