Microsoft Corporation (MSFT), Sony Corporation (ADR) (SNE): Wii U Numbers a Catch-22 for Nintendo

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The company faces a decision as to whether it should drastically miss its Wii U sales projections or its profit estimates. If Nintendo wants a shot at selling anywhere close to a respectable number of Wii Us, a sizable price drop is in order. Not so fast. The preferred version of the Wii U currently sells at a loss for Nintendo with an MSRP of $349. This is primarily due to the screen and streaming technologies in the system’s Gamepad controller. The financial hit that Nintendo would need to take to stimulate Wii U sales would surely cripple any chance the company has of nearing the ballpark of its profit forecast. Still, even a price drop in conjunction with a stronger software lineup than is currently available for the system might not entice consumers to jump on the Wii U.

The Other Games In Town

Nintendo faces strong competition from its hardware rivals this fall. Microsoft Corporation (NASDAQ:MSFT) is set to release its Xbox One console and seems to be finding moderate success in its concerted efforts to salvage the system after a disastrous reveal.

Microsoft Corporation (NASDAQ:MSFT) has recently announced a hardware upgrade for the system as well as initiatives to aid and garner support from indie developers. The Xbox One will launch with an MSRP of $499 and offer more advanced graphics technology, the industry’s premier online gaming service, and better third party support than the Wii U is likely to ever see.

Sony Corporation (ADR) (NYSE:SNE) is also slated to launch its PlayStation 4 during the holiday period. The system has enjoyed highly favorable responses from journalists and online communities and presently enjoys the best buzz out of the “next-gen” consoles. The PlayStation 4 is set to launch with an MSRP of $399 and hardware that can achieve better performance than the Xbox One.

With Microsoft Corporation (NASDAQ:MSFT and Sony Corporation (ADR) (NYSE:SNE) launching more technologically advanced consoles with superior network integration at $499 and $399 respectively, the Wii U’s value proposition becomes increasingly shaky.

The system’s greatest strength is that Nintendo is developing games for it, but, at this stage, it is obvious that even big titles like Super Mario 3D Land are not enough to make the Wii U relevant.

With that in mind, I expect Nintendo to take a very middle of the road course of action. Look for the company to scrap production of the Basic Wii U SKU while reducing the MSRP of the Premium bundle to $299. The company has to create a greater price distinction between its console and the Xbox One and PlayStation 4. If Nintendo chooses not to cut the Wii U price this holiday season, take it as an admission that, roughly a year after release, the company is not interested in the future of the device. Either way, heads could be rolling when it comes time for annual reports.

Keith Noonan has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Keith is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Wii U Numbers a Catch-22 for Nintendo originally appeared on Fool.com is written by Keith Noonan.

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