Shacknews - Asif Khan

Nintendo reported disappointing Q1 results after the close in Japan today.The quarter was lacking any sort of positive catalyst as not one Nintendo software title on 3DS or Wii U sold 1 million units. The Pokemon Go launched in the second quarter of Nintendo's fiscal 2017 and its massive success has yet to be reflected in the bottom line results of the company. Nintendo also pointed out that Super Mario Maker had launched in the year ago quarter, creating difficult year over year comparisons.

  • Sales of Nintendo 3DS hardware and software were 0.94 million (7% decrease on a year over year basis) and 8.47 million units (7% increase on a year over year basis) respectively.
  • Sales of Wii U hardware and software were 0.22 million (53% decrease on a year over year basis) and 4.68 million units (3%increase on a year over year basis) respectively.
  • Amiibo figure-type and the card-type sales remained at approximately 1.7 million units and 1.3 million units respectivelymainly due to a lack of new titles that are compatible with amiibo

Adding to the downward pressure in sales was the appreciation of the Yen versus the Dollar and Euro. 72 percent of Nintendo's sales come from International markets. 35 billion of the 38.6 billion yen loss was attibutable to foreign currency exchange losses. This should make shareholders feel a little bit better as Nintendo can't control currency markets. The strong Yen is a headwind that all Japanese exports face and the Bank of Japan is expected to take action to alleviate those pressures in an upcoming meeting.

Looking towards the rest of their fiscal 2017, Nintendo reaffimed the launches of Pokemon Sun and Moon this fall and NX in March of 2017. Regarding their mobile app roadmap the company said, "We will release new apps such as Fire Emblem and Animal Crossing. By continuously introducing apps for smart devices, we aim to maximize the population that has access to Nintendo IP. Alongside creating new demand, we aim to increase the synergistic effect on Nintendo’s dedicated game system business." It remains to be seen if Nintendo will be able to gain traction with their mobile apps outside of the smash hit Pokemon Go.

Nintendo also announced that Pokemon Go Plus will be delayed until September. This delay of the highly anticipated companion device to the wildly successful Pokemon Go app is just yet another blow to fans of the Big N. Nintendo surprisingly did not adjust their full year guidance and still expects to be profitable in fiscal 2017.

There are a number of positive catalysts ahead of Nintendo, but today's news will undoubtedly put downward pressure on the company's stock. Bold investors may view this as an opportunity to scoop up shares of a company that are down over 30% in a little over a week. 

Full Disclosure:

At the time of this article, Asif A. Khan, his family members, and his company Virtue LLC had the following positions:

Long Nintendo via NTDOY ADR

Shacknews - Asif Khan

Nintendo UK and Nintendo of America have announced via late night tweets that their highly anticipated Pokémon Go Plus accessory has been delayed until September. 

The Pokémon GO Plus is a small device that lets you enjoy Pokémon GO while you're on the move and not looking at your smartphone. The device connects to a smartphone via Bluetooth low energy and notifies you about events in the game—such as the appearance of a Pokémon nearby—using an LED and vibration.

Pokémon GO Plus will begin to blink and vibrate whenever you're within range of a PokéStop. Press the Pokémon GO Plus button to search the PokéStop for items. If you find any items, swipe or tap them to add them to your inventory.

When a Pokémon is near, the light on the Pokémon GO Plus will flash. It will also flash and vibrate when you pass a PokéStop. 

Once a Pokémon is close, press the button on the Pokémon GO Plus to throw a Poké Ball. You'll only be able to throw a Poké Ball using Pokémon GO Plus if you've caught the Pokémon before. The Pokémon GO Plus will flash and vibrate to let you know if you were successful in catching the Pokémon.

Sadly, we all have to wait until the fall for this new way to catch Pokemon. The delay of this highly anticipated companion device for the Pokemon Go app is just one disappointment coming out of the Big N today as the company also reported a wider than expected Q1 loss after the market close in Japan. 

Shacknews - Asif Khan

Peak Apple? Probably not yet.

The Apple Inc. third quarter earnings release reported another year over year decline in earnings and revenues after the closing bell today. The company posted quarterly revenue of $42.4 billion and quarterly net income of $7.8 billion, or $1.42 per diluted share. These results compare to revenue of $49.6 billion and net income of $10.7 billion, or $1.85 per diluted share, in the year-ago quarter. Gross margin was 38% compared to 39.7% in the year-ago quarter. International sales accounted for 63% of the quarter’s revenue. 

Earnings, down 23% year over year, beat the Wall Street consensus estimate of $1.38/share by 4 cents/share. Revenues, down 14.5% year over year, beat Wall Street's consensus estimate of $42.1 billion by $300 million. Apple's results were not great, but they were not as bad as many bears had expected. The midpoint of the company's guidance for Q4 revenue came in above Wall Street's consensus estimate of $45.8 billion by $700 million. The stock is up over 7% in afterhours trading on the back of these better than expected results.

It is not all apple sauce for shareholders today, as the company reported year over year decreases in unit sales of iPhone, iPad, Macs, and other products (Apple TV, Apple Watch, Beats products, and accessories). One standout in the Q3 results was the Services segment with year over year 19% sales growth. Services is now the second largest revenue segment at Apple Inc., with Q3 revenue of $5.9 billion. This operating segment includes Internet Services, Apple Pay, and App Store.

Another interesting data point is that while iPad experienced a 9% decline in year over year unit shipments, the product segment was able to grow revenue at 7% on higher average selling prices. This is most likely attributable to customers upgrading to higher priced iPad Pros. The iPhone segment experienced the opposite phenomenon as unit sales dropped 15% year over year while revenue dropped 23% on lower average selling prices of the smartphone, likely the result of the launch of iPhone SE that ramped up during the quarter. This is the second consecutive quarter that Apple Inc. has reported year over year declines in iPhone sales and company-wide revenues. iPhone represented 56% of Apple's revenues in the quarter.

Macintosh sales only make up 12% of Apple's revenues, and were down 13% year over year. Mac appear to be slowing more rapidly than the broader PC industry. We will know more as the rest of tech companies report their quarterly results, but this is a new trend that Apple Inc. needs to address with a more compelling lineup. They have not materially updated their flagship MacBook Pro line this year, and that could provide potential upside going into the end of the year.

Apple Inc. ended the quarter with $231.5 billion in cash, down $1.5 billion from $233 billion on the balance sheet at the end of Q2.  The company's cash hoard decreased for the first time in seven quarters. The company returned over $13 billion to investors through share repurchases and dividends in the quarter, and have now completed almost $177 billion of the ongoing $250 billion capital return program. Apple’s board of directors has declared a cash dividend of $.57 per share of the Company’s common stock. The dividend is payable on August 11, 2016 to shareholders of record as of the close of business on August 8, 2016.

Why is the stock up 7% on such mediocre news? I believe that investor sentiment had gotten too negative since the company lowered their guidance earlier this year. Wall Street was positioned for another flush to 52 week lows in the share price and when the results came in the bears had to cover their shorts. I believe that we are in a period similar to 2004-6 for Apple Inc. In those days, iPod represented more than 65% of revenues and many bears claimed that we were witnessing "Peak Apple." Our own Chatty community had a discussion about this just last week.

"I'm not saying apple will go away so much as I'm saying we have hit peak apple" - bradsh, Chatty user.

Most of the media is claiming that Apple's best days are behind it as iPhone sales are slumping. Others pile on the negativity saying that the company has yet to prove they can innovate without Steve Jobs. Apple Inc. has a history of introducing a new product category as another one matures. It is easy to claim we have witnessed "Peak Apple" after 9 years of iPhone sales growth, but it may be just as misinformed of a statement as those who claimed the company was peaking when iPod demand peaked. Peak iPhone? Maybe. 

Peak Apple? I doubt it. The company is opening their brand new space ship campus next year. This was a project introduced by Steve Jobs just a few months before his passing. A project introduced in 2011 that will not be completed until 2017. This is the pace at which Apple does business. Steve Jobs began conceptualizing the iPad as early as the 1980s, prototyping began in the early 2000s, and the product ultimately launched in 2010. Apple bulls believe that there were multiple things left in the pipeline before his passing. Steve Jobs famously told Walter Isaacson that he "cracked the code" in television, and we have yet to see Apple Inc. or anyone else truly disrupt the product category.

Faith is not an investment strategy, but it is required to believe that there is material upside to Apple's stock. Investors have to believe that there is another product category that can spur revenue growth at the company. Otherwise, declining average selling prices and margins will erode Apple's profitability and ulimately lead them into a lost decade similar to the 2000s for Microsoft.

Apple is investing in new products. Research and Development expenses are at their highest level in history and there are rumors continuing to swirl about an electric vehicle project. Tim Cook praised Pokemon Go on the conference call and reaffirmed that Apple will continue to invest in AR. With the amount of cash at their disposal, I wouldn't bet against Apple right now.

2016 will undoubtedly be a forgettable year for Apple, but it remains to be seen which way the company's fortunes will bounce from this inflection point. At the end of the day, the stock trades at a discount to its peers and the S&P 500. It is one of the worst performers in the Dow Jones Industrial Average this year and revenues continue to decline. It is completely understandable to think that the company's best days are behind it, but they are generating huge cash flows from a dedicated user base.

I will continue to stay invested in the stock, which I have owned since 1997. The stock trades at 11 times forward earnings estimates and pays investors a 2.3% dividend yield to wait and see if their faith is founded in logic or just a foolish desire for one more thing.

Full Disclosure:

At the time of this article, Asif A. Khan, his family members, and his company Virtue LLC had the following positions:

Long Apple Inc. via AAPL common stock and options

Shacknews - David Craddock

During his rundown of Apple's Q3 earnings in today's conference call, CEO Tim Cook praised Pokemon Go and reaffirmed the company's investment in the burgeoning AR space.

Cook, who adorably mispronounced the game as "Pokey-man," referred to Niantic's mobile sensation as "a testament to what happens with innovative apps." He affirmed his belief that "AR can be huge," and that Apple has been "and will continue to invest in this."

Apple's CEO was delighted by the fervor Niantic's app continues to rouse in consumers as it expands to other countries such as Japan. Delighted, but hardly surprised. Apple's been laying groundwork for a bigger focus on augmented reality for a while. Back in 2015, it acquired Metalio, a small startup famous for building AR tools such as one for Ferrari that gives prospective buyers a virtual tour of vehicles.

Earlier this year, Apple scooped up Flyby Media, another AR outfit. Flyby worked alongside Google to develop Project Tango. an app that scans three-dimensional objects ranging from fruit and hats to posters and buildings, and adds them to a global database to help devices learn to view the world around them.

Not far removed from the AR-VR space, Apple acquired Emotient back in January. Emotient made a name for itself by writing an app that analyzes facial expresses to gauge a person's mood.

Cook made it clear that he does not view AR as a separate platform, but one best suited for existing devices like smartphones and tablets. Of course, he would say that, considering how much money his company has raked in from IAP sales of "Pokeyman" Go.

In more bittersweet news, Apple's stock gained momentum despite another decline in iPhone sales.

Shacknews - David Craddock

Bungie will launch a patch for Destiny later today that continues to pave the road to Rise of Iron, but Xbox 360 and PS3 owners will have to get off at the next stop.

"This update will also be the last scheduled deployment for Legacy Consoles, excluding emergency fixes for future game-breaking issues," Bungie wrote in an announcement (via GameSpot).

Support for "legacy" versions of Destiny officially ends on August 16, after which players will no longer be able to share character progress across current- and last-gen hardware. You'll still be able to play online if you're running on Xbox 360 or PS3, although you won't be able to participate in special modes like Iron Banner.

The rest of the patch notes square away niggling details in advance of the September 20 release of Destiny's Rise of Iron expansion pack.

Shacknews - Daniel Perez

Compulsion Games has released We Happy Few on PC and Xbox One via each platform’s respective early access program. We already gave you a look at an hour of its gameplay, but we wondered “What would happen if we took the Joy pill during We Happy Few’s prologue?”

Well - that’s exactly what we decided to do in the following video.

During the prologue, your character come across a document that shares a bit of your backstory. Upon seeing the document, you start to have a bit of a breakdown which can only be fixed by taking a dose of Joy. While many will choose to remember this particular document, we decided to play nice and take our medicine like a good little boy.

But what kind of game would We Happy Few be if we all just took our medicine? Find out below:

Shacknews - David Craddock

PlayStation Store listing for Rise of the Tomb Raider, due out on October 11, reveals that you'll get a digital download code for Tomb Raider: Definitive Edition as soon as you complete your order (via GameSpot).

Tomb Raider: Definitive Edition is an HD repackaging of 2013's series reboot on Xbox 360, PS3, and PC. Rise of the Tomb Raider was a timed exclusive for Xbox One last year, and trekked onto PC earlier this year.

In celebration of Rise of the Tomb Raider's arrival on PS4, Crystal Dynamix and Square Enix have loaded the game with tons of extras besides the first game's HD touch-up. Besides the base game, you'll get, all previously released DLC, an art book, a new story chapter boasting support for PlayStation VR, and the usual assortment of outfits and virtual cards endemic in video games circa 2016.

Players who purchased the game on PC or Xbox One will eventually get the extra content included in the PS4 version, minus PSVR support, obviously.

Shacknews - David Craddock

In an interview with Edge magazine (via PC Gamer), Epic co-founder Tim Sweeney shared his opinion that Microsoft could weaponize future updates to Windows 10 to destabilize competing storefronts—namely Valve's Steam, the biggest competitor to the Windows Store.

Sweeney outlines his case. For the past few decades, PC apps have been written for 32-bit environments, or Win32 codebase. That includes every PC game for Steam. Unfortunately, Win32 has a fatal flaw. "It’s been both responsible for the vibrant software market we have now, but also for malware. Any program can be a virus," he said.

Enter Microsoft's Universal Windows Platform, or UWP. According to Sweeney, it's next to impossible for UWP apps to contain or be viruses because they exist in Microsoft's sandbox. They're vetted, and locked down.

"The risk here is that, if Microsoft convinces everybody to use UWP, then they phase out Win32 apps. If they can succeed in doing that then it’s a small leap to forcing all apps and games to be distributed through the Windows Store. Once we reach that point, the PC has become a closed platform. It won’t be that one day they flip a switch that will break your Steam library – what they’re trying to do is a series of sneaky maneuvers. They make it more and more inconvenient to use the old apps, and, simultaneously, they try to become the only source for the new ones."

When asked for to expand on his theory, the Epic co-founder postulated that all Microsoft has to do to turn users off of Steam is patch Windows 10 to chip away at compatibility for Win32-compatible software. Year after year, patch after patch, Steam and other Win32 apps would become progressively more unstable and inconvenient to use. In parallel, the UWP will become more attractive.

"They’ll never completely break it, but will continue to break it until, in five years, people are so fed up that Steam is buggy that the Windows Store seems like an ideal alternative. That’s exactly what they did to their previous competitors in other areas. Now they’re doing it to Steam. It’s only just starting to become visible. Microsoft might not be competent enough to succeed with their plan, but they’re certainly trying."

Should you somehow get the impression that Sweeney is in favor of Microsoft throwing its weight around with UWP, think again. He and others have been vocal about the dangers of locking developers out of certain features and functions unless they agree to write software exclusively for the platform.

This strategy—should Microsoft move forward with it—has the potential stifle innovation, if not suffocate it outright. Sweeney believes the PC has remained at the forefront of graphical innovations due to the platform's open nature. By herding developers into its walled garden, Microsoft would set the pace of new technologies—not just graphics, but VR, AR, and other game changers.

Shacknews - Daniel Perez

Compulsion Games has released We Happy Few on PC and Xbox One via each platform’s respective early access program. We’ve been keeping an eye on We Happy Few for a little over a year and even made it to our E3 2016 Game of the Show list, so we just couldn’t contain our excitement for the game when we receive a special preview code overnight.

While we work on our official preview of We Happy Few, we thought we’d capture some footage and share it in a video focusing on its gameplay. Our gameplay video shows off the game’s prologue and the part of town where it appears all of the Downers are corralled. We were able to complete a couple of side missions and interact with our fellow Downers for an hour, so feel free to watch and let us know what you think so far of We Happy Few based on our gameplay video.

Shacknews - Daniel Perez

Pokemon Go continues to dominate the smartphones of nearly everyone around the world as it has more than doubled its downloads within a single week.

Last week, Pokemon Go achieved over 30 million downloads since its initial release in North America, New Zealand, and Australia on July 5. In a single week, Pokemon Go is estimated to have achieved over 75 million downloads across both iOS and Android devices, according to a recent report by Sensor Tower.

The game was also able to achieve 50 million downloads in record time, which Sensor Tower compares it with other popular apps, like Candy Crush Jelly Saga, Color Switch, and more.

Niantic has only launched Pokemon Go within 32 markets where both the App Store and Google Play operate, although it plans on releasing the game across over 100 markets. At the rate that it currently has, we could see even more record-breaking numbers as soon as the Pokemon Go becomes available within additional territories.

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