Nintendo’s Switch Success Could Lead to Mobile Trouble

April 28, 2017, 5:23 PM UTC

As Nintendo prepares to release another portable gaming device, one analyst believes the company’s latest console might cannibalize its hardware sales.

In a note to investors on Thursday, Wedbush analyst Michael Pachter said that Nintendo Switch, the iconic game company’s latest console, could hurt sales of its portable hardware, including the 3DS XL and 2DS. He noted that there are feature similarities between Nintendo’s Switch and its portable hardware, which could ultimately increase pressure its already-declining portable sales.

“We think that the persistent declines in 3DS sales will be exacerbated by the introduction of Switch, which serves as a hybrid handheld,” he wrote. Pachter added that he believes Switch sales will ultimately push Nintendo’s portable sales lower “for the next several years.”

Nintendo (NTDOY) released its Switch console earlier this year. The device is a hybrid of home consoles and portables that allows gamers to play titles on their televisions and on the go. The Switch sits in a dock that’s connected to a television for big-screen play. Users can then remove it from the dock to play on its built-in screen when they’re away from a television. It’s so far proven exceedingly popular and could double Nintendo’s profit this year.

The Switch’s portable function technically puts it in direct competition with Nintendo’s 3DS XL and other portable hardware. And Pachter apparently believes customers will only choose one device instead of owning both a Switch and portable.

Nintendo, however, continues to invest heavily in portables.

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On Friday, Nintendo announced plans to release a new portable called the 2DS XL on July 28. The device, which will cost $150, has two screens and a clamshell design for easy portability. It sits in the midrange of Nintendo’s portable lineup, alongside the $80 Nintendo 2DS and $200 Nintendo 3DS XL. The 3DS XL is the only portable in the lineup that supports 3D video.

“It’s a nice device, but it’s not a Switch and the games aren’t the same high quality,” Pachter said of the 2DS XL in an interview with Fortune on Friday. “The handheld business is going away and the innovation is in the Switch.”

Pachter added that the 2DS XL comes with a sturdier design than the Switch. But he noted that most Nintendo gamers use the Switch “in their laps,” suggesting they view it more as a portable than a home console.

Ultimately, that could spell trouble for Nintendo’s portable unit. And although new hardware tends to sell well initially and could bolster declining divisions, Pachter isn’t so sure that will happen with the 2DS XL.

“I don’t think very many people will buy both the 2DS XL and Switch,” he said.

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