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Nintendo shares fall on 'Super Mario Run' disappointment

1st Mario game for smartphones stutters in Japan, but it may prove a slow-burner

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  © Reuters

TOKYO -- Shares in Nintendo are reeling from investor disappointment over "Super Mario Run," the Japanese company's first smartphone game featuring the iconic Mario character.

After falling for four straight days through Friday, the shares continued sliding Monday, closing the day at 24,540 yen, down 7%.

"Super Mario Run" became available for download via Apple's iPhone platform on Friday. It will be released in 151 countries in phases.

Unlike many other phone-based games, players do not have to pay for in-game items or to advance to another stage, but instead pay a one-time fee of 1,200 yen ($10.22) after clearing a free-of-charge stage.

Market expectations were high for the game, not only because of the massive popularity of the Mario character, which has become almost synonymous with Nintendo, but also because of the huge success of "Pokemon Go," a smartphone game released earlier this year. Investors saw the potential for Nintendo to tap a new area of growth.

Buoyed by such expectations, Nintendo shares surged by more than 30% over a roughly one-month period from early November, when they were at their recent low. On Dec. 12, they cracked the 30,000 yen line for the first time in about five months.

But the stock price began heading south again following the release of "Super Mario Run." Although the game climbed to the top of the sales rankings in such countries as the U.S., the U.K., France and Australia at Apple's App Store, it ranked only fourth in Japan as of Monday, with many users complaining that the free-of-charge portion of the game is too limited.

The tepid response spurred profit-taking.

Contributing to the bearishness are the falling share prices of DeNA, which works with Nintendo in developing and operating games. The company's shares have fallen about 20% from their recent high in November.

Precipitating the share slide was a scandal in which DeNA content-curation sites reproduced information without permission of the rightful owners as well as provided inaccurate information.

"We should watch [the problems at DeNA] closely to see if they spill over to other businesses," an analyst at Ichiyoshi Research Institute said, adding that investors are probably unloading Nintendo shares due to such concerns.

Too early to judge

As for "Super Mario Run," Japanese gamers may yet come around on it. Junko Yamamura, an analyst at Nomura Securities, rated the game highly, comparing its structure to that of "Super Mario Bros.," Nintendo's immensely popular game for consoles.

"Its difficulty gradually increases as you play, and you can run the same course again and again," Yamamura said. "These features have been maintained and optimized in transferring the game to smart devices."

Fumio Matsumoto of Dalton Capital (Japan) said that although many individual investors are selling Nintendo shares to lock in short-term gains, he will remain on the sidelines for now.

"The fate of 'Super Mario Run' alone won't change the direction of Nintendo's business structure and growth strategy," Matsumoto said, adding that the company is not changing its "neutral" rating on Nintendo shares.

An analyst at Deutsche Securities said the Nintendo Switch, a new game console the company plans to introduce next March, may prove to be a more fundamental catalyst in determining the direction of Nintendo shares.

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