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Weak Wii U Sales Are Dragging Nintendo Down


Lower than expected sales of Nintendo's new console are forcing the company to reconsider many of its earnings forecasts.

Today, after releasing its consolidated financial highlights for the nine months ending December 2012, Nintendo (PINK:NTDOY) announced that it was slashing its sales outlooks for the Wii U. The company originally had hoped to sell 5.5 million units by March, the end of its fiscal year. Based on the current Wii U sales numbers, however, Nintendo has revised that number to 4 million. In comparison, its previous console, the Wii, sold 3.17 million units in its first six weeks, and 6 million at the end of the fiscal year in March 2007.

From its launch to the end of December 2012, the Wii U has only sold 3.06 million units globally, and at the moment, Nintendo has little reason to suspect a pickup will happen anytime soon. The company has blamed the console for its 5.8 billion operating loss and cut its fiscal year sales outlook by 17% to 670 billion yen. Naturally, the Wii U software sales for the system haven't fared much better. So far the company has only managed to sell 11.69 million games, well below Nintendo's forecasts. In response to this weak demand of the console, the company cut its sales estimates by a third to 16 million units.

Nintendo is still in the green, thanks to the weakening yen and lower production costs for its 3DS handheld, but analysts are wondering how much longer the company can hang on without losing money. The 3DS has had stronger sales as of late, but concerns that the tablet and smartphone markets will cut into its market share in mobile/casual gaming are beginning to become more prominent. Even Nintendo must be taking notice, for the company slashed the sales predictions for the 3DS as well, and is aiming for 15 millions now instead of its October estimate of 17.5 million units.

Nintendo loyalists may be quick to note that the company has scrambled out of tough positions numerous times in the past, but at the moment it seems that the company has little to look forward to. As stated in previous articles, the Wii U's biggest issue is getting the great game developers to stock its library and show off its features. Gamers I've talked to are just waiting for some knockout titles to come along as incentive to commit to the system. Although Nintendo has always been great at handling its own franchises and greater third party support seems to be on the horizon, many of the best early year titles, like Dead Space 3 (NASDAQ:EA), Metal Gear Solid Revengeance (NYSE:KNM), and Tomb Raider (PINK:SQNXF), will not be available on the Wii U, indicating that it might be some time before things get better.

Looking into the future, the console's presence on the market may soon be seriously overshadowed by the upcoming releases for Sony's (NYSE:SNE) PS4 and Microsoft's (NASDAQ:MSFT) Xbox 720, which will likely dwarf the Wii U in hardware specs. If it wants to maintain its presence in the industry, Nintendo may really need to land on its feet this year, because it's getting attacked on all sides.
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