Ironically, as the two most popular gaming consoles gear up for their refresh, smaller competitors could benefit.
The Sony (SNE) PlayStation 4 and the Microsoft (MSFT) Xbox One are nearly in your hands, and incidentally, there's a chance two competing companies stand to benefit as well: Nintendo (OTC:NTDOY) and Advanced Micro Devices (AMD).
Learn more with our Infographic: Next Gen Gaming with New Xbox One and PS4 Consoles
Nintendo is up along with Microsoft shares in the last six months compared to AMD:
Click on the interactive chart to view stock prices over time.
Suprisingly strong sales
Nintendo announced 300,000 new users for Wii U in its quarterly results. The boost in sales was spurred partly by a price cut. Nintendo wants to have 9 million consoles sold by the end of March 2014. For now, the company is losing money to build its user base, after dropping around $82 million in the quarter.
As the PS4 and Xbox One consoles roll out, Nintendo could be poised to benefit if consumers decide a less expensive option is preferable.
It is also important to note that Nintendo is not completely dependent on traditional console sales. Handheld console sales are still growing. Nintendo sold 2 million 3DS/3DS XL handheld consoles in the quarter.
Microsoft could back away from the traditional model
On the eve of the Xbox One launch, rumors are circulating that Microsoft could sell Bing and Xbox. If Stephen Elop becomes CEO of Microsoft, this could very well happen. The Xbox unit cost Microsoft billions in the last few years, so this move makes sense to some analysts.
Free from trying to push Microsoft into the living room, the software giant would focus on other products. Server software and office productivity apps are very profitable for Microsoft. Interest in Windows 8.1 is steady but weak, as is demand for Windows tablets. These are two areas of potential growth, but would likely need Microsoft’s full attention to perform better in the future.
AMD could get a boost
In the end, AMD could benefit from both the console refresh and from better Nintendo sales. The chip maker makes the system on a chip for both the PlayStation and Xbox One, and supplies the HD GPU for Nintendo's Wii U.
So will investors line up for these companies, the way they line up for the new consoles?
Written by Chris Lau. Disclosure: Author has a long position in AMD
© Kapitall, Inc. All rights reserved. Kapitall Wire is a division of Kapitall, Inc. Kapitall Generation, LLC is a wholly owned subsidiary of Kapitall, Inc.
Kapitall Wire offers free cutting edge investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by Kapitall Inc., and its affiliate companies.
Open a free account today get access to virtual cash portfolios, cutting-edge tools, stock market insights, and a live brokerage platform through our affiliated company, Kapitall Generation, LLC.