Why Nintendo Should Sell (And Why Sony Should Buy It)

I know I've been a little tough on Nintendo lately, saying recently that the company should ditch plans for hardware and start licensing its software, and explaining why I believe it won't be able to chart the gaming industry's future. And although many Nintendo fans didn't like it, I'm a firm believer that the company's recently announced fiscal year losses seem to prove my point.[Image credit: Doug Kline]

In case you missed it, Nintendo announced recently that it lost a whopping $532.5 million on a weak yen, sluggish Wii sales, and its inability to turn a profit on a single 3DS unit it sold. Revenue was down 36.2 percent compared to the prior year.

That poor performance, in tandem with my concerns that Nintendo will never be able to turn things around with the Wii U, make me believe that it's time for the company to sell off its operation to the highest bidder.

Why now, you ask? Simple: the end isn't near yet. Nintendo still has a robust hardware division and its software is still wildly popular around the world. And I don't see Apple's iPhone and other mobile devices fully killing off Nintendo's portable division for about 10 years. In other words, it still has some value to a would-be buyer.

However, if Nintendo waits too long, I just don't see the company ever creating enough value from its company for shareholders to be happy. Barring an unbelievably lucky console launch, I just don't see the Wii U helping to improve Nintendo's hardware business. And as noted, I have no faith in its portables. Waiting too long to be acquired could be a huge mistake on management's part.

[aquote]I only see one company that could make a smart move acquiring Nintendo: Sony[/aquote]

But that's just half of this story. Despite countless companies that might see value in Nintendo, I can only see one at this point that could conceivably make a smart move by acquiring the gaming company: Sony.

Let's not forget that Nintendo is absolutely huge in Japan, making it an immediately attractive target for a company like Sony, which is trying to reestablish itself as the premier Japanese electronics firm. What's more, it consolidates the gaming space, giving Sony more leverage and all but limiting Microsoft's chances of dominance.

Another key component of the deal is Nintendo's strong first-party lineup. One of the biggest issues with Sony is that it doesn't have the best in-house development studio. What better way to supplement that than with a Nintendo acquisition?

Now, I should say that I realize the chances of Nintendo selling off its business to Sony are somewhat slim. And I know that the regulatory hurdles the companies would need to overcome could be huge. But it makes sense for both parties. Like it or not, drastic measures need to be taken for both Sony and Nintendo to fix their businesses. And Sony acquiring Nintendo might be just the ticket to make it happen.