The Nintendo Wii U has had disappointing sales results for the third quarter. The struggling gaming console produced far less than expected sales revenue during the Christmas season. Nintendo sold 1.95 million Wii U consoles throughout the world in the third quarter. In comparison, customers bought 3 million of Microsoft’s Xbox One and 4.2 million of Sony’s PlayStation 4, both new releases. Nintendo was able to produce a profit of $99.6 million but that figure was down significantly compared to the same period last year.
Nintendo, which also produces the popular handheld 3DS, acknowledged that the Wii U was harming profits. The company launched a mark down program in its United States and European markets which was intended to spur desire in the product. However, sales did not meet anticipation and the company revised its original estimate of total year sales from 9 million consoles to a dismal 2.4 million.
Nintendo had disappointing sales results for the third quarter, but the fourth quarter is expected to be worse. With the holiday season over, the company is expected to sell only a few hundred thousand consoles this period. However, stocks were up 1.3% presumably anticipating the release of new versions of Nintendo’s highly successful Mario Kart and Super Smash Bros this spring. Nevertheless, the company issued statements declaring the Wii U was not in good shape and it expects sales to fall significantly. The popular Nintendo 3DS is also expected to slump and the company cut sales estimates by 25% for the handheld player.
The Nintendo Wii U is a small part of an almost $100 billion industry. However, the system was anticipated to do better in this era of next generation consoles. Once popular Nintendo Games, such as Super Mario, seem to have lost some of their customer appeal to the incredibly popular online games that the Xbox and PlayStation 4 have to offer. Nintendo has struggled over the years to compete in the online gaming market, which is dominated by 1st person shooters such as the Call of Duty series.
The lackluster performance last quarter has forced Nintendo to acknowledge a change in its business model is possible, including a potential entrance into the mobile market. Top company executives, including the president of the company, have taken responsibility for the company’s poor performance and have agreed to only taking half of their salary. Nintendo is planning to buy back roughly 10 million shares, about 8% of the total amounting to $1.2 billion. According to the chief executive officer the buyback program is an attempt to reward shareholders. The company stated it is in possession of $8.6 billion in cash and does not have debt, which should help attract future investment.
While Nintendo struggles to recoup from its disappointing third quarter sales, the company will not have a change in leadership. Although the company’s stock prices fell about 8% this year, Nintendo is believed to be financially stable enough to make necessary changes. It seems improbable that Nintendo will be able to recreate the major success it had during the 1990’s, mainly because it is having difficulty entering the online market. The company has already ruled out selling the rights to its characters, most likely hoping Mario and Princess Peach will help the company profit in the future.
By Peter Grazul