20 years after Pokemon, can Nintendo get mobile?

Key Points

Twenty years after Nintendo launched the first of its phenomenally successful Pokemon games, propelling portable gaming to frenzied levels and creating a generation of Pikachu obsessives, the group has yet to transition its famous gaming stars onto our smartphone screens.

Starring the yellow mouse like critter, gamers were urged to "catch 'em all" and train all 150 Pokemon, making it one of the best-selling game franchises in the world, selling more than 277 million video units and earning some $58 billion in revenues.

Members of the trade walks past the 'Pokemon' booth
Timothy A. Clary I AFP I Getty Images

But two decades later, gamers are yet to enjoy Pikachu, and peers Mario, Zelda and Donkey Kong on their phones and tablets.

The Kyoto- based company cut its earnings guidance for this fiscal year by half on Friday, on concerns of a stronger Japanese yen and weaker-than-expected sales of its handheld game device, strengthening the view that the group needs to speed up its foray into the mobile gaming world.

"Nintendo is the most iconic game maker in the planet and have unrivalled, self-developed Intellectual Properties (IPs). But investors are wondering how aggressive Nintendo will be at entering the mobile gaming market," CEO of Japanese gaming consultant and advisory group, Kantan Games, Serkan Toto told CNBC.

Nintendo's long-awaited entry into the mobile gaming market is coming in a somewhat roundabout way. The publisher, The Pokémon Co. and game developer Niantic have announced this week "Pokémon Go," a new franchise that will let players catch, train and battle the virtual creatures in real-world environments through augmented reality.

People dressed up as Pikachu, the famous character of Nintendo's videogame software Pokémon, dance in a Pikachu Outbreak event in Yokohama, Japan, in August.
Pokémon leads Nintendo's mobile charge

The announcement comes as Nintendo prepares to announce its own mobile game later this year. (While Nintendo and The Pokémon Co. are affiliated, Nintendo owns just 33 percent of the firm.) And while "Pokémon Go," technically, may not count as the real start of Nintendo movement into mobile, it's still a game that has the Japanese company's fingerprints all over it.

The game will follow the common free-to-play model with added "microtransactions." This has prompted analysts to scale down their expectations that Nintendo's mobile push will turn revenues round quickly. But they are nonetheless optimistic, given the strength of its franchises.

"Peers like Activision Blizzard and Electronics Arts in the U.S. have also struggled to tap the mobile space for profits, but Nintendo have some advantages here. Firstly they have chosen the right partner – DeNA, which have years of experience in mobile gaming," Toto said.

The group's strategy will also target a mainstream audience, with family friendly, non-violent games that should go down well with the "Angry Birds" generation.

"Its core target group have all migrated to tablet and mobile, but everybody wants Mario Kart on their mobile, if they released that, they would make billions," Toto said.

Mario on your phone? Nintendo may embrace Android

Analysts at Nomura said the group has highlighted a shift to smart devices, which are movements worth paying attention to.

"Management also indicated the possibility of a certain level of upfront investment in order to get the two businesses fully up and running, and developments here will warrant attention," said Junk Yamamura, Nomura analyst, with the group maintaining a neutral rating on the stock for now, as investors have already factored in prospects for the smart device business.

As a follow-up to its mobile launch, Nintendo are also launching a new subscription-based online platform, My Nintendo, where users can play games online and on smart devices, purchase games and the scheme will also serve as the company's new loyalty program.

"Nintendo is a very Japanese, very conservative company. It doesn't help that they are based in Kyoto, in a bit of a bubble, away from the metropolis. But investors I speak to are more positive. Even in the last 3-4 months, as their 1st application has been named and it has been dated, there is a trailer and a rollout strategy. So longer-term things are looking positive," Toto said.