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Financially strapped Nintendo confirms Wii U will be sold at a loss

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(Credit: Nintendo)

Nintendo has a lot riding on the Wii U. More than anything, it's hoping the new console will help turn around the company's troubled finances.

But it may not do so for a while.

Nintendo company president Satoru Iwata, in a call discussing the company's financial results, announced Thursday that the company would sell the Wii U at a loss. This marks the first time in Nintendo's history that it has put a new system on sale at a loss. Nintendo has been a rarity in the gaming world, traditionally making money on both hardware and software.

"Rather than determining a price based on its manufacturing cost, we selected one that consumers would consider to be reasonable," said Iwata.

While this is the first time Nintendo has released a system at a loss, there is a precedent of sorts, believe it or not.

When the 3DS came out, the company sold it at a small profit, but soon found that price was too high for most consumers. It quickly adjusted (to a point where it lost money on hardware sales) and the 3DS took off, building an installed base for Nintendo to recoup the losses with game software licensing fees.

It's a move that makes plenty of sense, but given Nintendo's recent financial woes, it could give investors heartburn. Nintendo cut its annual net profit forecast earlier this week by 70 percent, posting losses for the first half of the year totaling $351 million. That's 40 percent higher than analysts were expecting.

On the upside, Nintendo says it does expect to return to making a profit in the next six months. It's predicting worldwide Wii U sales will hit 5.5 million units by the end of March 2013, with 24 million software units (aka games) sold.

Not everyone believes they'll hit those numbers, though.

"[That] 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," said Wedbush analyst Michael Pachter in a note to investors.

The Wii U releases on November 18 in North America for $300 or $350, depending on the model.

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