Apple Nintendo Sony: The power of focus

Apple Nintendo Sony: benchmarking. Apple and Nintendo are focused on a very small number of products. Sony produces a huge range of different products.

Lets benchmark three iconic companies:

Apple Nintendo Sony

  • APPLE: Wednesday October 22 APPLE announced spectacular full-year results with a year-on-year net income increase of 38%. The results are even better than they look, because iPhone sales and income are spread forward over 2 years due to accounting rules. (See our comments on CNBC here)
  • NINTENDO: on August 29, 2008 Nintendo revised the forecast for full-year net income upward by +26.2% (See our comments on CNBC here)
  • SONY: in contrast, on October 23, 2008, SONY said that full-year net income (for the financial year ending March 2009) is expected to be 37.5% lower than previously predicted (see our comments on SONY’s 1Q results here on CNBC)

Apple Nintendo Sony – Lets look at today’s market caps:

  • APPLE market cap = US$ 85.6 Billion (about 4 x SONY)
  • NINTENDO market cap = US$ 37.2 Billion (about 2 x SONY)
  • SONY market cap = US$ 19.9 Billion

Apple Nintendo Sony – Why this dramatic difference in market caps? We believe its focus.

Apple and Nintendo are companies with clear focus. Lets look at the details below:

Comparing revenues (sales):

SONY = 3 x APPLE
SONY = 4 x NINTENDO

Annual revenues of Apple, Nintendo and SONY
Annual revenues of Apple, Nintendo and SONY

Comparing annual operating income:

APPLE = 3 x SONY
NINTENDO = 3 x SONY

Operating income of Apple, Nintendo and SONY
Operating income of Apple, Nintendo and SONY

Comparing operating margin:

APPLE = 9 x SONY
NINTENDO = 15 x SONY

Operating margin (operating income as a ratio of revenues) for Apple, Nintendo and SONY
Operating margin (operating income as a ratio of revenues) for Apple, Nintendo and SONY

Read our report on Japan’s electronics industry sector:
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Today’s APPLE 4th quarter results vs NINTENDO

A few hours ago (Oct 22, 2008, 6am Tokyo Time) APPLE announced 4th Quarter and Full Year results – we are here updating our comparison between APPLE and NINTENDO. With 6.9 million iPhones sold in APPLE’s 4th Quarter (July + August + September 2008), APPLE has achieved 2.76% market share of all mobile phones globally.

APPLE strongly accelerates lead over NINTENDO in term of sales (see figure below) – even more dramatically, if we take into account that the iPhone in 4th Quarter now accounts for 39% of APPLE’s sales. APPLE accounts for iPhone sales in terms of a subscription model over two years because of free software updates for iPhones. If we would use APPLE’s non-GAAP figures, which book iPhone sales fully at the point of sale, then APPLE’s sales lead over NINTENDO would be even stronger.

In terms of margins we see the opposite trend: NINTENDO‘s lead over APPLE in terms of higher margins expands (see below).

Watch our interview about APPLE’s 4Q results today 11:50am (Tokyo time) on CNBC as a video clip.

Apple accelerated lead over Nintendo in terms of revenues.

Apple’s lead would be more dramatic if correcting for Apple’s subscription model used for iPhone sales according to GAAP rules.

Annual revenues, operating income and net income of Apple vs SONY
Annual revenues, operating income and net income of Apple vs SONY

While Apple’s lead over Nintendo in terms of sales is growing, Nintendo’s lead in terms of operating margins is expanding.

Operating margins: Apple vs Nintendo
Operating margins: Apple vs Nintendo

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Tech Sector Outlook (CNBC TV interview)

More in our J-ELECTRIC report: http://www.eurotechnology.com/store/j_electric/

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Games: Nintendo – the winner takes it all

Game industries in total are MUCH bigger than music industries… in Japan game industries are about 10 times bigger business than music industries… Last weekend we had the Tokyo Game Show – read some key points below! From 2006 Japan’s game sector changed dramatically- Nintendo created several paradigm shifts, and “took off”. Read more about Nintendo driven paradigm shifts below. US games giant Electronic Arts (EA) would rank 5th in sales, was EA Japanese. Japan’s games industries are big!

Nintendo income takes off: Nintendo broke the PC-style race for faster machines, and broke out of the limited market of hard core gamers. From FY 2007 Nintendo’s income takes off:

Operating income for Japan's electronics companies
Operating income for Japan’s electronics companies

Nintendo’s DS: braintraining instead of shooting.

SONY’s PSP goes for power, and Nintendo’s DS changed the paradigm + went for lower price. By the way, we see a shift from TV video games to portable and mobile phone games in terms of numbers: for current 7th generation game platforms portables outsell TV video consoles 2:1. DS’s success encouraged Nintendo to develop the Wii.

sales of SONY-PSP vs Nintendo DS in Japan and globally

Avoid the dinosaurs:

global sales of Nintendo Wii, SONY Playstation PS3, and Microsoft Xbox-360

“Too many powerful consoles are like ferocious dinosaurs. They might fight and hasten their own exinction” (Nintendo’s Shigeru Miyamoto in an interview). Nintendo’s Wii has much less power, lower screen resolution, and is much cheaper to make and cheaper to buy than PS3 and Xbox360. Nintendo makes money on every Wii sold.

Sales of Nintendo-Wii vs SONY-PSP vs Microsoft XBOX
Sales of Nintendo-Wii vs SONY-PSP vs Microsoft XBOX

Report: “Nintendo and Japan’s games industries” (9th edition, 181 pages, release October 15, 2008, pdf-file for download):

Eurotechnology report on Nintendo and Japan's game industry
Eurotechnology report on Nintendo and Japan’s game industry

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Nokia & Sony Ericsson Results Likely to Disappoint (CNBC TV interview)

More in our J-ELECTRIC report: http://www.eurotechnology.com/store/j_electric/

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Paradigm change of the global mobile phone business and opportunities for Japanese mobile phone makers

Presentation at the CEATEC Conference, talk NT-13, Meeting Room 302, International Conference Hall, Makuhari Messe, Friday October 3, 2008, 11:00-12:00.

See the announcement here [in English] and in Japanese [世界の携帯電話市場のパラダイム変更と日本の携帯電話メーカーのチャンス]

The emergence of iPhone, Android, open-sourcing of Symbian, and the growth of mobile data services are changing the paradigm of the global mobile phone business opening new opportunities for Japanese mobile phone makers. Japan’s mobile phone handset makers have missed most opportunities during the first wave of mobile phone opportunities. The developing paradigm change opens new opportunities for Japanese makers. The talk will explain the paradigm shifts and trends of the global mobile phone handset market, and resulting opportunities for Japanese mobile phone makers, and will indicate how these opportunities can actually be realized.

Download the presentation as a pdf-file here (in Japanese language)

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