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Nintendo's earnings disappoint as Wii U falls short

The company's new console could only muster 3.5 million unit sales worldwide last fiscal year, cutting Nintendo's profit to be half of what it had expected.

Nintendo's Wii U
Nintendo's Wii U Nintendo

Nintendo's profit during its last fiscal year ended March 31 turned out to be half of what the company had expected, thanks to disappointing Wii U sales.

During the 12-month period ended March 31, Nintendo saw sales slide 1.9 percent year-over-year to 635.4 billion yen (about $6.4 billion), off its initial estimate of 670 billion yen. The company's operating loss -- a key measure of performance -- was 36.4 billion yen, substantially higher than the 20 billion yen it expected to post on the year.

The one bit of good news for Nintendo was that the company was able to post a slight profit of 7 billion yen. However, the company had hoped to generate a 14 billion yen profit.

So, what happened? Blame it on the Wii U. During its last fiscal year, Nintendo sold only 3.45 million Wii U hardware units worldwide. Nintendo's Wii, the device the Wii U replaced, was able to garner 4 million unit sales during the same period. The Wii, though, was on sale the entire fiscal year, while the Wii U was only available for a portion of that time.

Still, it's clear that the Wii U is underperforming. And Nintendo addressed that today in its outlook for the next fiscal year:

For the "Wii U" system, launched in the fiscal year ended March 31, 2013, there were some delays in software development that resulted in intervals between new software title releases at the early stage of this year. Taking this into consideration, for the fiscal year ending March 31, 2014, we plan to concentrate on proactively releasing key Nintendo titles from the second half of this year through next year in order to regain momentum for the platform. Nintendo strives to improve the sales by communicating the compelling nature of our hardware and software to as many people as possible through our new network service called "Miiverse," which offers an environment where people can empathize with others and share their gaming experiences. We also strive to reduce costs to improve hardware profitability.