Analysts cautiously optimistic on Nintendo's 3DS

Industry followers see potential in latest handheld, suggest reveal could steal thunder from Sony's own leap into 3D gaming or next version of the PSP.

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Nintendo of Japan today revealed its plans for a new 3D-capable version of the DS handheld, tentatively dubbed the 3DS. The announcement came in the form of a no-frills three-paragraph press release, with no mention of games, pricing, or pictures and no public demonstration of the system's abilities.

If the 3DS works well, Nintendo could find itself pulling in enough money to satisfy even this guy.
If the 3DS works well, Nintendo could find itself pulling in enough money to satisfy even this guy.

While there's precious little to react to, a handful of industry analysts were willing to go on the record with GameSpot about the idea of a 3D handheld without glasses and possible reasons for why Nintendo would announce the system in the week before the North American launch of the DSi XL, potentially undercutting that hardware debut.

Electronic Entertainment Design and Research analyst Jesse Divnich said he's never seen glasses-less 3D in a portable unit, so he couldn't give an opinion as to whether the technology is good enough to draw in the masses just yet. However, he didn't mince words when it came to the way Nintendo handled the announcement.

"I find the entire press release highly suspect," Divnich said. "It was certainly done in an unorthodox manner. I believe Nintendo didn't have a choice, I theorize that the announcement was probably going to be leaked within weeks from inside sources, as there have certainly been many un-credible leaks lately. And this is likely a power-play to make the term 3D gaming synonymous with Nintendo. I'd imagine that Sony is on the cuff with making their own announcement about their push into 3D gaming. Now it just seems as if any announcement from a competitor is riding on Nintendo's coattails."

Pacific Crest Securities analyst Evan Wilson also suggested that the timing of the announcement was likely forced by unknown circumstances. And while he too reserved any judgment on the 3DS specifically, he said there's definitely a market for 3D handhelds, "but only if it's done well."

"Today’s announcement is so difficult to interpret, because we can't judge the implementation," Wilson said. "People laughed when Nintendo showed a picture of the Wii Remote for the first time, but the implementation was fantastic. I'm holding back my chuckles until I get to play with the 3DS."

One of the biggest eyebrow-raising points of the Nintendo announcement is that the 3DS won't require users to wear special glasses in order to get the 3D effect. While that does alleviate some problems with past 3D gaming experiments, Wilson said the need for glasses hasn't been the only thing holding the technology back all these years.

"I think the main barrier has been in the shoddy implementation of 3D in games (and movies)," Wilson said. "The implementation has vastly improved in movies and the glasses don’t seem to be a big deal anymore. The same could very well happen in games."

Janco Partners analyst Mike Hickey said Nintendo's current DS hardware line is approaching obsolescence but added that 3D could be seen as a significant improvement by customers, and the company is pursuing "the most identifiable forward market opportunities."

"Ultimately, if Nintendo can create a 3D portable DS platform at a reasonable price point, and effectively leverage their extensive game portfolio, we think they can likely up-sell their massive DS installed base, which would likely prove highly successful," Hickey said.

In a note to investors, Lazard Capital Markets analyst Colin Sebastian was upbeat about the potential of the 3DS. He said third-party publishers would be quick to support the system in light of Nintendo's previous dominance of the handheld market, adding that the 3DS "could have broad appeal and spark a new cycle of innovation within the industry."

Sebastian said that would be particularly good news for retailers like GameStop, as a new hardware arms race would give the retailer plenty of physical products that would draw people into stores despite the increasing prevalence of digital distribution. While console successors to the PlayStation 3 and Xbox 360 may not be on the horizon, Sebastian said he expects Sony to announce "a new PSP handheld device this spring," with Nintendo revealing "an updated console in the coming year."

Almost as surprising as Nintendo's 3DS announcement was the reaction of the Wedbush analyst Michael Pachter. When asked by GameSpot what he thought of the 3DS, the usually verbose industry follower said it was simply too early to assess the system.

"Without knowing how or if it works, I can't really comment on its potential," Pachter said.

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