Microsoft has $60 billion in offshore cash that they aren’t likely to repatriate for tax reasons. They just spent $7 billion of it on Nokia. Now they should buy Nintendo. It might take $20 billion or more given Nintendo’s current market cap of about $14 billion. That’s a relative bargain given Nintendo’s library and it is a much better purchase than Gung Ho (Puzzles and Dragons) which has a higher market cap. The potential upside for Microsoft is enormous for its console and phone businesses.
Hear me out.
The take some of Nintendo’s hardware team and put them on the phone team. Their focus would be making the phone a better gaming device. It would still be a phone or tablet first though.
They then take all of Nintendo’s beloved titles and make them Microsoft exclusives on the next generation of Windows Phones and on the Xbox One. This will cause all the kids (and a significant number of adults) to want Windows Phones so they can play Mario games, Zelda, Metroid, and, of course, Pokemon. Since these games would only be on Windows Mobile it has the potential to drive significant adoption by the most influential audience – the young.
When Microsoft launched the Xbox, it bought Bungie to get Halo. Halo has continued to drive Xbox adoption. Nintendo would be an even bigger play with the potential to dramatically alter the phone wars by giving a large block of gamers a huge incentive to switch to a Windows Phone.
Not only would this purchase dramatically shift the balance of power in the smartphone wars, it would also dramatically alter the battlefield that is the living room. The next generation of consoles, generally framed as Xbox One vs. Sony’s PS4 but including Nintendo’s Wii U on its periphery, is not just about games. It is also about the future of television and video content. Winning this battle is critical for Microsoft and Nintendo would be a game changer (pun intended). The reason this generation of the console wars is even more critical to Microsoft is because of the looming war for the television with Apple, Google, Android (I mention them separately from Google because there will be other significant players in the ecosystem such as Samsung, Amazon, and things like Ouya), and others (Intel for example).
This iteration of the console war may also determine a big part of the future of tethered communications: video calls. Xbox One + Kinect should become a de facto video conferencing system. Imagine families connecting via room sized video conferences – this can be done right now with these consoles. Microsoft SHOULD own this space with the combination of Xbox One and Skype. Throw Nintendo into the mix and it would almost certainly win the next generation console wars, and hence the living room, for Microsoft.
Not to mention the synergy between Xbox One and Windows Phone: games that cross over, games that use Windows Phone as a secondary control, deep second screen integration, and cross platform video conferencing, just to name a few. A Microsoft acquisition of Nintendo would either accelerate the development or adoption of all of these things.