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Nintendo in crisis?

Wow. We're not prone to being dramatic here at Digitaledge but, OMG: it looks like Nintendo could be in the midst of a real crisis.

The big N announced crappy financial results today, with revenue in the second quarter of 2011 down more than 50% on the same time last year. And it admitted losses of $328 million in the first quarter of the year.

The problem is slumping hardware sales. 1.56 million Wii consoles were sold during the quarter, half as many as the same time last year. DS sales were also down around half at 1.44 million.

Of course, the DS is old. But the 3DS, its new replacement which debuted this Spring, has sold even more poorly, with just 710,000 units shifted during the quarter.

In response, the company agreed to give the 3DS a whacking great price cut. In the US, it's going from $250 to just $170, a drop of a third. In Europe, Nintendo doesn't control the price as directly, but it's expected that from August 12th you'll be able to get a new 3DS for below £150. Nintendo will reportedly make a loss on every 3DS sold at the new price, in the hope of making the money back from games sales - a strategy long pursued by Sony and Microsoft, but which Nintendo have generally stayed away from.

Of course, selling consoles at a loss means lost revenue in the short term. Nintendo also revised down its profit forecast for this year to just £257 million.

Will the 3DS price cut make a difference? Surely, yes, as it means the new console isn't that much more expensive than its 2D predecessor. At the very least, this should mean the new DS isn't outsold by the old version any more.

But what's really needed is killer games. The only must-have 3DS title so far is a remake of a ten-year-old N64 game, Zelda: Ocarina of Time.

In the long run, Nintendo's financial health depends on big success for the Wii U, launching next year.

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