TOKYO Nintendo Co. Ltd. 7974.OS briefly
zipped past Sony Corp. (6758.T) in market capitalization on
Monday to become one of Japan's 10 most valuable companies as
it elbows the PlayStation maker out of its decade-long
dominance of the game industry.
Nintendo joined global household names such as Toyota Motor
Corp. (7203.T), Honda Motor Co. (7267.T) and Canon Inc.
(7751.T) on the top-10 list before its shares erased earlier
gains and ended the day lower.
The Kyoto-based company finished in the 11th place by
market value, just above Panasonic maker Matsushita Electric
Industrial Co. (6752.T) and below Sony. Those companies, the
world's largest and second-largest consumer electronics makers,
both have sales more than eight times as big as Nintendo's.
"It is becoming quite clear that Nintendo is taking back
its market share from Sony in the console market while well
defending its stronghold of portable games," Mizuho Securities
analyst Takeshi Koyama said.
Nintendo's Wii game console has outsold Sony's PlayStation
3 by three to one in Japan and by more than two to one in the
United States so far this year, according to game magazine
publisher Enterbrain and research firm NPD.
Demand for its DS handheld game players also far
outstripped that for Sony's PlayStation Portable.
Koyama said, however, that investors should watch out for a
possible pull-back after two year-long bull runs.
"This is one of those companies that is not exactly making
daily necessities. One negative factor and shares could take a
dive. We need to be careful in dealing with shares like this,"
Nintendo's shares rose as high as 46,350 yen, a record
high, in the morning session, boosting its market value to 6.57
trillion yen ($53 billion) and narrowly surpassing Sony's
"I don't think this is a case of Sony being in bad shape as
a company. Rather, Nintendo is doing well with the Wii," said
Soichiro Monji, chief strategist at the equity management
department of Daiwa SB Investments.
"However if you look at Nintendo's price-to-earnings ratio
it is quite high. So I think the stock has largely factored in
some of the future growth."
Nintendo closed down 0.8 percent at 45,100 yen, bringing
down its market value to 6.39 trillion yen, a touch below
Sony's 6.48 trillion yen.
Based on the closing price, Nintendo's prospective
price-earnings ratio comes to 36.5, compared with 20.3 for
Sony shares have put on 66 percent over the past two years,
outperforming the Nikkei average .N225, which rose 57
percent. But Nintendo shares soared nearly fourfold over the
Nintendo has offered a slew of innovative and easy-to-use
game software such as "Brain Age" and "Nintendogs" for its
hardware in recent years, broadening the game-playing
population beyond young males to women and the elderly.
Sony, which has dominated the $30 billion game industry
over the past decade with its PlayStation and PlayStation 2,
saw a slow start for the PS3, launched late last year, due
mainly to its high prices and lack of attractive software
Strong sales of the Wii and DS have prompted third-party
software makers to actively develop new titles for the Nintendo
machines, creating a virtuous circle for the company known for
such game characters as Mario, Donkey Kong and Pokemon.
Sega Sammy Holdings Inc. (6460.T), for example, plans to
almost double the number of new software titles for Nintendo
hardware to 49 in the year to March 2008, while cutting the
number of new titles for Sony gear by 45 percent to 42.
Sony's game unit posted an operating loss of 232 billion
yen in the year ended March, hit by heavy start-up costs for
The division, however, is estimated to report a much
smaller loss for the current business year, and profits at its
mainstay electronics unit will likely grow sharply, led by
brisk demand for its Bravia liquid crystal email@example.com;