Top Analyst Slams Nintendo's 'Unrealistic' Wii U Numbers - Wired

Will the Wii U’s dual-screen play be enough to hold off serious competition for holiday dollars this year? Nintendo predicts sales of 5.5 million units worldwide, which one analyst finds too low. Photo: Nintendo

Gaming industry analyst Michael Pachter has looked into Nintendo’s recent financial reports, and he does not like what he sees.

“Wii U guidance is both disappointing (for hardware) and unrealistic (for software),” the managing director of equity research at Wedbush wrote in a note to investors on Wednesday, following the release of Nintendo’s financial results for the first half of its fiscal year.

Nintendo forecasts worldwide sales of 5.5 million units of its new Wii U gaming console between its launch on Nov. 18 and the end of March. Pachter said he was expecting sales of 6-7 million units.

In a press conference held Wednesday in Osaka, as reported by Bloomberg, Nintendo said it would sell Wii U hardware at a loss. Nintendo CEO Satoru Iwata said that the company seeks to create a “healthy business” overall by selling Wii U software at a profit.

Nintendo said it expects to sell 24 million Wii U games by the end of March, which Pachter finds unrealistically high.

Sales of 5.5 million consoles and 24 million games, he wrote, “implies an attach rate of over four games per console, which we view as highly unrealistic given the steep price of both console models (which will limit the applicable gamer’s ability to purchase additional games), 23 launch-day releases (with some likely to slip), a somewhat murky launch window that boasts many big names but lasts 4.5 months, and compelling competitive devices.”

Wii U is Nintendo’s next major move in the wildly popular but rapidly shifting game industry. In another attempt to set itself apart from the competition, Wii U games are played across two screens: A television, and a handheld tablet controller that syncs up wirelessly to the gameplay on the TV. One player could play Super Mario Bros. on the big screen while another adds helpful items to the playfield by tapping the touchscreen, for example. Nintendo hopes to fend off increasing competition from smartphone, tablet and PC gaming by creating unique games that would be impossible on other devices.

A $150 Wii bundle for the holiday season will include the incredibly popular Skylanders Giants game. Photo:Nintendo

The high price of Wii U â€" $300 for the base model and $350 for a premium package â€" will be a short-term boost for Nintendo but a long-term drag, Pachter wrote.

“In our view, Nintendo was smart to introduce the Wii U at higher price points in order to maximize initial sales from its core audience,” he said, but noted that “demand will probably wane once Nintendo’s core fan base has purchased the first 5 â€" 6 million units … we believe the console’s popularity will be somewhat limited beyond Nintendo’s core fan boy audience.”

Cheaper alternatives â€" the reduced-price Xbox and Kinect bundles that Microsoft will have on shelves this year, the $200 Kindle Fire HD and the $330 iPad Mini â€" could also reduce demand for Wii U this holiday, he said.

Alongside its financial report, Nintendo announced two new bundles for the original Wii console. Pachter says he sees these as being very positive moves. A $130 bundle will package the new game Just Dance 4 in with the hardware, and a $150 package will include everything a player needs to get into Activision’s megahit Skylanders â€" a Wii console, the Skylanders Giants game and three of the interactive Skylanders figurines.

“We view the Skylanders Giants bundle as particularly compelling from a value perspective given that a stand-alone starter pack for the game… retails at $75, meaning that the consumer is paying only an incremental $75 for the Wii console and a number of accessories,” Pachter wrote. This announcement has led Wedbush to raise its fiscal year sales expectations for Wii consoles dramatically, from 3.8 million units to 5 million.

A silver lining in a gloomy analysis. But the old workhorse Wii is not Nintendo’s future. Wii U is, and even Nintendo seems to agree that it faces a difficult challenge ahead.