If you have a Wii U on your shopping list that you have yet to secure, good luck.
Nintendo (NASDAQOTH: NTDOY ) claims to have sold 400,000 of the next-generation gaming console since last week's debut, and gamers are apparently snapping them up as quickly as retailers can stock them.
Nintendo of America president Reggie Fils-Aime -- in a CNET interview yesterday -- offers up internal data showing that the company sold 1.2 million systems across all of its hardware lines last week.
It's an encouraging number for a company that's coming off its first annual loss in decades, but let's not rush to welcome the Japanese gaming giant to the turnaround party. There are plenty of reasons to be left unimpressed with the numbers and remain concerned about Nintendo's near-term prospects.
Let's dive right in.
- Nintendo may have sold 400,000 Wii U consoles, but it also sold 300,000 Wii systems. Isn't anyone concerned that this ballyhooed update sold just 100,000 more units than a tired system that is six years old?
- Yes, Nintendo is apparently selling them as quickly as it can make them, but that's also a problem. Developers aren't going to invest in games with small playing bases. Why put out a Wii U game now when the title will be forgotten by the time that the system has millions of owners? Nintendo is fortunate to have strong proprietary franchises, and that is serving it well with Super Mario and Nintendo Land launch titles. Microsoft (NASDAQ: MSFT ) and Sony (NYSE: SNE ) have harder hurdles to clear when they roll out their new consoles in 2013 or 2014. It's still a problem when you're too small for third-party developers.
- Fils-Aime points out that the original Wii was hard to keep stocked for three years after its launch. It better realize that the same thing won't happen here. The Wii was far cheaper than the PS3 and Xbox 360 at launch, but now the Wii U is more expensive. Time also isn't kind here. Nintendo didn't have to contend with Android or iOS devices when the original Wii rolled out in 2006. It's a whole new world out there now.
- Even if Nintendo is capacity constrained, 400,000 isn't all that impressive. Apple (NASDAQ: AAPL ) revealed earlier this month that it sold 3 million iPads in just three days, and developers know that they have an installed base of hundreds of millions of iOS devices.
If there's a twisted silver lining to just a third of the systems that Nintendo sold last week being the Wii U, it's that the company is actually taking a loss on the hardware. Microsoft and Sony have done this in the past, but this is supposedly the first time that Nintendo has been willing to sell its console for less than breakeven.
The good news there is that all it takes is one software purchase to turn that investment positive, and obviously that's going to happen.
I was one of those 400,000 buyers. I'll have a review from an investor's perspective out later this week. However, for now, clearing a ton of older hardware through Black Friday door-busters and having a problem keeping a margin-munching console in stock isn't all that impressive.
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