Should Microsoft (MSFT) Skip Nokia (NOK) and Go After Nintendo?

Microsoft (Nasdaq: MSFT) was said to be aiming for the acquisition of Nokia's (NYSE: NOK) devices business, which saw talks fall apart recently. But, should Microsoft be looking to acquire something completely different right now?

Our unqualified opinion might point to the acquisition of ailing Nintendo. Microsoft got a bunch of gamers in an uproar recently following news that there would be limited game sharing for its Xbox One console, which would lead to less piracy and more money for game developers. Not exactly a way to win its target demographic over. However, the company revamped its policy yesterday, allowing for more lenient sharing ability with limited Internet connection.

That might not be enough, though. With the introduction of its PlayStation 4, Sony (NYSE: SNE) largely said no Internet was needed, gamers could share games, and the price of the console is even $100 cheaper than Microsoft's Xbox One.

Should Microsoft move instead to acquire Nintendo, a few positives might come from it. Microsoft would likely gain additional technology patents for future devices and would expand its user base with a new niche market. Also, Nintendo still has one of the best-selling hand-held consoles in the 3DS.

Most of all, it would gain rights to some of the most recognized titles/characters in the gaming industry: Mario, Metroid, Link (Zelda), Donkey Kong, Pokemon, Kirby, and more.

Nintendo's market value is somewhere around $15 billion, but lagging sales of its Wii U console and games have caused the company a little bit of trouble recently. Its CEO, Satoru Iwata, also doesn't see mobile devices and tablets taking market share away from traditional game consoles, a similar reaction that BlackBerry (Nasdaq: BBRY) and Nokia execs had to the Apple (Nasdaq: AAPL) iPhone when it first came about in 2007. While total annihilation might not be true, significant market share is being lost and Nintendo isn't the same powerhouse it once was to fend off the competition.

With about $66 billion cash overseas, Microsoft could easily put together a package that Nintendo execs and inside shareholders might like. Nintendo might even go cheaper over the next few months as rival consoles begin selling (Nov. - Dec. time frame).

Or maybe Microsoft should go after both?

Shares of Microsoft are lower in early trading.

Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items - JOIN NOW *NEW - Download StreetInsider's FREE iPhone and iPad App - Click Here begin ad tag (tile=12) -- End ad tag --

Sign Up

Get the InvestingChannel
Free e-Letter Today

Learn More

Independent market opinion, analysis and ideas - delivered every business day

Premium market opinions, analysis, and ideas - delivered every business day

Editor's Picks