The Wii U was introduced by Nintendo (NASDAQOTH:NTDOY) alongside a stunning array of promises. The "U" in the system's poorly chosen name was intended to signify that it would be a device that offered something for everyone. Its GamePad controller would usher in new styles of play and shift the very the foundations of game design. Third parties would be there in abundance, supporting the device with their biggest franchises now that Nintendo's console had the horsepower to output HD graphics. The importance of a thriving online ecosystem had been recognized and was a major focus for the company. If you've been following the Wii U with any regularity, you've surely noticed a trend with regard to the outcome of these promises--they were all broken.
Without a doubt, the most egregious of Nintendo's broken Wii U promises will also be its most objectively quantifiable. CEO Satoru Iwata made a commitment to selling 9 million Wii Us and achieving approximately $1 billion in operating profit for the fiscal year ending March 2014. Despite every indication that these projections are phenomenally off-base, Nintendo has opted against revising them. Has the company completely lost it, or is there a deeper strategy at play?
New years resolution: stop being so negative
Let's get something out of the way--the Wii U is not going to approach the ballpark of Nintendo's stated targets. The only question is how catastrophic the miss will be when it's finally recorded in the company's year-end report. All signs point to "very."
Doing a bit of simple math should help nix the notion that Nintendo believes it will come anywhere close to its targets. Even if Iwata is right and one game can change everything, the writing is on the wall and no amount of insistent denial can change what's coming. Nintendo's figures show that only 160,000 Wii Us were sold in its first fiscal quarter. Its next quarterly report tallied 300,000 Wii Us sold worldwide, with many of these sales coming after a price drop and the release of a bundle featuring the company's The Legend of Zelda: The Wind Waker HD. In this same quarter, the device posted negative 20,000 sales across Europe, with at least that many units being sent back to Nintendo by retailers.
An optimistic take on numbers and timeframes
With Europe soundly out of the picture, Nintendo would have to sell about 8.5 million Wii Us across North America and Japan in the span of six months to meet its target. Is there a prophetic visionary among us bold enough to hazard a guess as to how that will turn out? If you're still not a disbeliever, let's throw some more numbers together.
Based on reliable leaks of NPD Group's sales tracking, the Wii U's October sales were under 60,000. November's figure looks to be around 220,000 units. December is a five-week tracking month compared to November's four and Nintendo at least has the potential to outdo that month's meager figures. A generous 60% growth multiplier would make for a hypothetical 352,000 units sold in December.
With one week of Famitsu reporting left to go, Japanese Wii U sales for the quarter stand at approximately 380,000 units. Let's once again be generous and say that it sells another 140,000 units in the final week of the Japanese holiday period, bringing Japan's quarterly total to 520,000 units. Because I'm feeling festive now that the holidays are finally over, let's also assume Wii U can sell 200,000 units in Europe over the third and fourth quarters just for kicks. Adding these optimistic figures up brings the system just north of 1.35 million units for the quarter and 1.81 million units YTD.
Is this the best U can do in the face of competition?
To say that the Wii U's final quarter at bat will post numbers substantially lower than the last would be a sizable understatement. The console gaming market frequently experiences the post-holiday blues, with spend burnout and a lack of quality titles typically contributing to low January-March sales. What's more, the Wii U has been overshadowed by the launches of the Sony (NYSE:SNE) PlayStation 4 and the Microsoft (NASDAQ:MSFT) Xbox One. Because the paint-by-numbers picture we're wrapping up is supposed to illustrate a best-case scenario, let's put fourth quarter sales from all major territories at a cool million. All said and done, you're looking at under 3 million Wii U consoles sold in fiscal year 2014.
Microsoft's new system sold approximately 910,000 units in the North American November tracking period, with the PS4 beating it out by a currently unknown margin. Both systems eclipsed the Wii U's LTD sales in the UK mere days after their respective releases. Early reporting has the PS4 outperforming the Xbox One in most territories, but Microsoft's system is practically guaranteed to outsell the Wii U at least twice over.
What will the new fiscal year bring?
Nintendo isn't stupid, or at least not stupid in the sense that it lacks the resources to perform basic addition. Its decision to maintain its Wii U forecasts in previous quarterly reports is at least partially about controlling media narrative. The fact is that using less generous numbers finds the Wii U's YTD sales coming in at closer to 2 million units. Nintendo will have almost no choice but to revise its projections downwards in its next report. If revisions aren't posted, expect President Iwata's resignation with the new fiscal year. Whether he sticks around or not, Nintendo is about to catch some serious heat.
Keith Noonan has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.