Things aren't getting any easier for Nintendo (NASDAQOTH:NTDOY). The Japanese gaming icon posted another quarterly deficit on Wednesday, weighed down by lackluster sales of the Wii U that was supposed to put the company back on the console gaming map last November.
It clearly hasn't worked the way that Nintendo wanted, and a recent price cut doesn't appear to be enough to salvage the pioneer from making a bigger difference in the console space. Nintendo sold just 300,000 Wii U systems in its latest quarter. Microsoft (NASDAQ:MSFT) and Sony (NYSE:SNE) will likely sell millions of their new systems this holiday quarter.
Nintendo did sell more than 5 million units of Wii U software during the period. That doesn't sound too shabby, but it's a far cry from how Nintendo is doing with its handheld gaming business. It sold three times as many 3DS software units -- and eight times as many 3DS systems as Wii U consoles -- so it's clear that Nintendo's future may lie in portable gaming.
This could be it for the gaming pioneer in the console market. Nintendo has conceded that this may be a possibility if it doesn't have a strong holiday quarter. Nintendo's also stopping production of the original Wii for Japan and Europe. It won't be long before it's gone completely. If you figure that Nintendo is moving away from the Wii because it's just not selling, think again. Nintendo sold 260,000 Wii systems in its latest quarter. That's lousy, but it's not all that different than the 300,000 Wii U systems. In fact, over the past six months, Nintendo has sold 10,000 more Wii than Wii U consoles.
Microsoft and Sony may be snickering at Nintendo's misfortune, but it's also important to remember that the Wii U wasn't even around a year ago. It didn't hit the market until mid-November, just as Microsoft and Sony will be doing later this month. Within a year, soft sales have threatened Nintendo's viability in this space. Can Microsoft and Sony avoid making the same rookie mistake?
What doomed the Wii U? If one argues that it's the high price -- something that Nintendo is hoping to rectify with its recent price cut -- it bears pointing out that the Xbox One and PS4 will be even more expensive. If Wii U's freshman flop was the result of weak software, keep in mind that it was at least organically compatible with earlier Wii software. Microsoft and Sony are going with an entirely new chip architecture this time around.
The good news for Microsoft and Sony is that their machines are clearly superior in terms of specs. They are also targeting a more diehard core of gamers than the Wii families that have been satisfied with cheaper and more widely accessible social and casual games. Naturally they will also benefit if Nintendo does in fact fold its consoles to focus on 3DS and software.
However, it's still important to note how an icon can fade so quickly after a bad year. Microsoft and Sony will need to hit the ground running this month. Gamers can't let them down.