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Kaufman Bros. Analyst Calls Third-Party Wii Support "Irrational Exuberance"

| 16 Apr 2007 16:08

A Kaufman Bros. analyst has referred to a rise in support of the Wii console by third-party publishers and the mass media as "irrational exuberance" in a note to investors.

Todd Mitchell, an equity research analyst for Kaufman Bros. L.P., praised Electronic Arts' investment in the Asian market, MMOGs, and other areas, but also stated, "We are getting tired of what we believe is irrational exuberance about the Wii." Detailing his concerns further, he added, "Yes, it is popular, and yes, it is taking share, but one investor recently told us how he thought it would revolutionize the way Americans exercise."

The comments follow Electronic Arts' announcement on February 1 of their intent to be the number-two publisher for the Wii, following only Nintendo itself. Electronic Arts Chairman and CEO Larry Probst indicated a market share target of 15-20 percent, and also stated that the increased focus on the Wii console, "is not at the expense of other platforms that we deem strategic."

Mitchell suggested that third-party publishers such as Electronic Arts may not actually benefit to any great degree from the Wii's success, and that instead of enlarging the market, their increased focus on the console may result only in a greater share for Nintendo. In his comments, Mitchell asked, "Did [the Wii] enlarge the market by more than the amount of share Nintendo was able to take from the other publishers by dominating sales on the popular platform?"

The statement appears to target the profitability of third-party publishers on the Wii format; Mitchell indicated that Nintendo's own software share gains are likely to be sustainable. "The Wii has caused the overall pie to get bigger", Mitchell said, "but the independent publishers may be getting a proportionately smaller slice."