Nintendo Is Finally Going to Bring Mario to Your Smartphone

Updated from March 17 to include information regarding Jefferies upgrade in the seventh paragraph.

NEW YORK (TheStreet) –– Super Mario is finally coming to your iPhone.

In perhaps one of the most surprising announcements in recent memory, Nintendo (NTDOY) unveiled a collaboration with Japanese mobile-gaming company DeNA (pronounced DNA) to bring all of its intellectual property, including Mario, Luigi, Princess Peach, Bowser and more, to smart devices. The two companies also announced a service that will let users play games on mobile devices, PCs and Nintendo's consoles, including the 3DS and the Wii U (which this journalist is currently enjoying). 

"DeNA will help them to figure the market out, but I'm not sure if there is something going on with this 'platform' that makes it easier or harder for consumers, and unclear if the subscription they are talking about will be an impediment to success," said Wedbush Securities analyst Michael Pachter. "We'll see, but I think this is a step in the right direction."

In addition, the companies are investing $181 million (22 billion yen) in each other. This move puzzled Hudson Square Research analyst Dan Ernst, who has been clamoring for Nintendo to do something in mobile for a long time.

"The alliance is intended to complement Nintendo's dedicated video game systems business and extend Nintendo's reach into the vast market of smart device users worldwide," the company's said in a

statement

.

The announcement by Nintendo and DeNA was a long time coming for both gaming enthusiasts and investors. Nintendo President Satoru Iwata said discussions had started in summer 2010, but the Japanese-based entertainment company had publicly denounced mobile games several times over the years, making the move a surprise.

Following the news, Jefferies analyst Atul Goyal upgraded shares to buy, noting putting Nintendo's intellectual property allows the company to move forward. "We believe Mario / Zelda / Pokemon / Donkey Kong on smartphones / tablets will expand its market and profit pool dramatically," Goyal wrote in the note. He raised his price target to 30,000 Yen.

Initial reaction to the news from consumers is overwhelmingly positive. "They view themselves as the Apple of gaming," video game enthusiast Steve Feldman, 36, said. "They always try to innovate and reshape the way we play video games." Casual gamers were excited about the news as well, with Lauren Kamm noting she was excited about the possibility of playing Duck Hunt, a popular Nintendo game, on her phone.

Last year, hedge fund Oasis Management put pressure on Nintendo to start making games for mobile devices such as the Apple (AAPL) - Get Report iPhone in an effort to compete and stand out from Sony (SNE) - Get Report PlayStation and Microsoft's (MSFT) - Get Report Xbox consoles.

According to the February data from research firm NPD, Sony's PlayStation 4 is still the dominant console, with Microsoft's Xbox One platform right behind. Hardware sales in the month were $378.2 million, up 10% year-over-year, with software sales rising 7% year-over-year to $338.9 million.

Nintendo isn't giving up on consoles, Iwata said at a press conference on Tuesday. He also announced the company's new console would be code-named NX.

Since its launch, Sony has sold more than 20 million PlayStation 4s. In its fiscal second-quarter, Microsoft said it sold 6.6 million Xbox consoles, but did not break that between Xbox One and Xbox 360. The company also noted that February Xbox One console sales rose 84% month over month, but did not disclose exact sales figures.

Though the Wii U remains a distant third to both the Xbox One and PS4, Nintendo has found some success with its handheld consoles, including the recent launch of the 3DSXL, a larger version of the 3DS. Nintendo sold 395,000 units of all versions of the 3DS, making it the top selling console of the month. The company also had the top-selling game in February, The Legend of Zelda: Majora's Mask 3D, as well as the 10th best-selling game, Monster Hunter 4 Ultimate.

Mobile games are increasingly taking a larger percentage of mind share, even if it they aren't taking wallet share.

Games such as Candy Crush from King Digital (KING) , Simpsons Tapped Out from Electronic Arts (EA) - Get Report and some offerings from Zynga (ZNGA) - Get Report, have exploded in recent years, as the iPhone and the smartphone market have spurred app development. Last June, Apple said it topped 75 billion app downloads, and Google (GOOG) - Get Report has surpassed 50 billion, as of 2013. Neither company breaks out the percentage of games that are downloaded from their app stores, but it's a healthy percentage.

Though there is obvious excitement about Nintendo entering the mobile-games market, with shares near a 52-week high, mobile games are less profitable than console games. Nintendo's American depository receipts were up 12.2% to $16.03 in early Tuesday trading.

Even though Zynga had 108 million monthly active users (MAUs) at the end of the fourth quarter, only 1.1 million of them were considered monthly unique payers, with the company generating $192.5 million in revenue and $182.3 million in bookings. By comparison, Nintendo generates about $3 billion in annual sales from its largest properties.

The move to mobile games may help bridge the divide between mobile games and consoles, where Nintendo still gets its bread and butter.