Nintendo Shares Gain After Switch Debuts Without a Glitch

(Bloomberg) -- Nintendo Co. shares rose on Friday to their highest in a month after a smooth debut of Switch, a hybrid console that aims to bring together the worlds of mobile and home gaming.

Retailers in Tokyo and Sydney began selling a limited number of units early, while fans in New York and Toronto waited in the cold to buy the new devices at midnight sale events. Demand easily outstripped supply, with most retailers exhausting both pre-order and same-day inventory within minutes or hours, signaling Nintendo is on track to reach its goal of shipping 2 million units by the end of the month.

Shares rose as much as 4.1 percent, also the biggest gain in a month, as analysts expressed optimism the launch was going well. Prior to Friday, Nintendo's stock had declined for four-straight days as some early negative reviews and concerns about potential defects unnerved investors.

“There's a sigh of relief today that the actual launch has gone smoothly so far,” said Atul Goyal, an analyst at Jefferies Group. “We have to wait and see if any major issue comes up by the end of the week.”

Switch, which sells for $300 or 30,000 yen, is the Kyoto-based company's biggest bet in years. Nintendo's late foray into making mobile games for smartphones has only just started, and the Wii U console was a flop, making it even more important that the new console succeeds. The new gadget is essentially a tablet sporting wireless controllers that can be used anywhere, on its own in the park or plugged into the living room TV.

So far, reviews are almost evenly split between positive and negative appraisals. Gamespot called it a “technical marvel,” while the Verge sang praises of its launch title, The Legend of Zelda: Breath of the Wild. IGN bemoaned compromises in the hardware to merge home and portable gaming, while Arstechnica said the machine's battery life is too short for long trips.

A line of about 90 people snaked through a stairwell at Bic Camera Inc.'s shop in Shibuya before it opened, mostly full of people who had not pre-ordered the new device. Among them was Yuki Adachi, 26, who was visiting from Osaka.

“I'm most excited about its portability. It's different from smartphones because it has chunky buttons useful for action games,” Adachi said. “I'm mostly looking forward to using it on the Shinkansen (bullet train) as I travel a lot between Osaka and Tokyo.”

Thousands of others throughout the world posted photos or live-streamed themselves buying the device, including one from Nintendo's flagship store in New York. The attention now turns to the weekend to gauge fan reaction and the device's durability. Several gaming reviewers who tested the system had reported connectivity problems with its Joy Con controllers, raising questions about hardware quality. Nintendo declined to comment on the issue.

Jefferies' Goyal said assuming major defects don't surface, the Switch should be in high-demand thanks to a first-year software lineup that is the strongest since the Wii launched a decade ago. The new Zelda game scored a 98 out of 100 on review-aggregation website Metacritic, making it the fourth-highest rated video game of all time. Snipperclips, another launch title, also received strong reviews for its innovative puzzle gameplay, which critics said showed off the Switch's multiplayer strengths.

“While this early adoption phase is important to build sales momentum, it can only take the Switch so far,” said Piers Harding-Rolls, head of games research at IHS Markit. “Convincing a wider audience to commit to the platform will take some work. A mixture of compelling content and features, price point, word of mouth and effective marketing will all need to come together to engage this broader audience.”

To contact the reporter on this story: Yuji Nakamura in Tokyo at ynakamura56@bloomberg.net.

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Reed Stevenson