Nintendo Reviving A Company

Nintendo: Reviving a Company, Transforming a Market

In the world of video games, Nintendo has been a household name for nearly three decades. After all, it was one of the pioneers of home video game consoles with the Nintendo Entertainment System in the early 1980s. It continued as the market leader with its Super Nintendo and Nintendo 64 systems. But in the mid-1990s, all that began to change. Along came Sony with its Playstation and Playstation 2, and Microsoft introduced the Xbox. Before long, Nintendo was reduced to a fraction of its former glory, running a distant third in a highly competitive market.

What happened? In certain respects, Nintendo fell prey to the industry model that it had created. More advanced technology led to the creation of more powerful gaming consoles, which in turn paved the road for more sophisticated games with more realistic graphics. As each new generation of product hit the market, Nintendo found that it could not keep up with more technologically advanced rivals. While more than 120 million Sony PS2s became fixtures in homes, apartments, and dorm rooms around the world, Nintendo moved just slightly more than 20 million GameCubes. As the most recent generation of gaming platforms from the gaming industry's "big three" came to market, many industry insiders figured Nintendo was destined to continue its downward path. Sony's PS3 and Microsoft's Xbox 360 were so advanced that it looked like Nintendo was due for another drubbing.

Oh what a difference a couple of years makes. For Nintendo, everything is now coming up Super Mario Bros. Last year, revenues and profits were up by 73 percent and 67 percent, respectively. In the last couple of years, during a time in which the Nikkei Stock Average fell nearly 25 percent, Nintendo's stock price tripled. In fact, Nintendo's stock price rose so high during 2007 that its market capitalization exceeded that of the Sony Corporation. On that measure alone, Nintendo became the second largest corporation in Japan, trailing only Toyota Motor Company. How did this struggling number three player go from product loser to product leader in such a short time?

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