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Shockingly low Wii U sales point to a console in crisis

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Nintendo has a problem on its hands.

The Wii U, in its second full month of availability, sold a paltry 57,000 units in the U.S. according to data from The NPD Group. That's substantially fewer than its predecessor and well under half the number analysts were expecting for the month. And it props opens the door -- and perhaps issues a warning -- for Sony and Microsoft, which are both expected to roll out new consoles this year.

To put into perspective just how bad the numbers are, it helps to look back to 2007, when the Wii had just come out. In that system's second full month on shelves, it sold 436,000 units, and demand was growing.

That doesn’t seem to be the case with the Wii U. Several key titles have been pushed out of the system’s launch window, including Rayman Legends, an anticipated platform game that is no longer exclusive to the system. Overall software sales are down as well.

The silver linings are few. According to BMO Capital Markets analyst Edward Williams, the attach rate is high. People who are buying the Wii U are buying more games to go with it. Nintendo is also back loading 2013 with a slate of AAA games including a new Mario Kart and an untitled 3D Mario action game from the team behind "Super Mario Galaxy."

But what's keeping people from buying now? Analysts say Nintendo flubbed the marketing of the new system, confusing consumers and shooting itself in the foot.

"The console received a tepid response from consumers, for a variety of reasons," says Wedbush analyst Michael Pachter, who had predicted hardware sales of 125,000 units. "First, we think that the console was misunderstood by many as a peripheral for the Wii; second, the price point for the Wii U is relatively high, and the launch was into a weak economy; and third, first party software support was thin, and third-party software was not sufficiently differentiated to convince many that they needed a Wii U as a replacement for their Xbox 360 or PS3."

Apologists might argue that Nintendo's January Wii U sales were simply part of an overall industry trend. Console sales on the whole were down last month as part of a steady decline brought about by a number of factors, including an unusually long period of time without new consoles.

But to put things in perspective, the Xbox 360, which is now in its seventh year, sold 281,000 units last month – nearly five times as many as the Wii U.

So what's Nintendo to do? Company president Satoru Iwata recently ruled out plans to cut the system's price, a move that helped Nintendo's struggling 3DS handheld regain a foothold less than six months after its launch in February of 2011. If he's got an ace up his sleeve, it's high time he plays it.

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