Nintendo tried to lower expectations about the impact of the smash hit Pokemon GO ahead of announcing its financial results, but even with those precautions, its latest quarterly earnings still reveal that Nintendo has fallen on tough times as sales for the Wii U and 3DS fell to new lows.

The company saw net sales drop 31 percent compared with the same quarter last year, from $853 million to $587 million, while it saw an operating loss of $48 million.

Nintendo Places The Blame On ...

For Nintendo's part, the company blames "foreign exchange rates" and "significant yen appreciation" for the drop in overseas numbers. In theory, the numbers would suggest the same, with Nintendo selling 222,000 Wii U consoles, a 53 percent decrease from last year, and 940,000 3DS units, a seven percent decrease from last year.

What's Really Going On

However, what is really going on is more or less what people have spouting for quite some time now: Nintendo doesn't have enough heavy-hitting games in its library. Yes, software sales have improved somewhat for both consoles, with Wii U software sales rising three percent to 4.7 million units and 3DS software sales increasing seven percent to 8.5 million. Despite that, not even a single game from either system managed to sell one million units in the past three months.

This is rather shocking when considering some of the titles that Nintendo had on the market in the past three months. Games like Kirby: Planet Robobot, Fire Emblem Fates: Birthright/Conquest and Bravely Second: End Layer no doubt helped to give 3DS software sales a stronger showing, but clearly, none of them did well enough to become anything more than a silver lining around this dark cloud.

What's worse, these 3DS software sales had no impact on Amiibo, which had 36.9 million sales due to the fact that very few titles were compatible with the collective figurines.

Meanwhile, the Wii U has offered next to nothing for quite some time, so sub-one million sales were expected. Three of the most notable games to be released for the system recently were Pokken Tournament, which didn't really have a proper audience; Star Fox Zero, which betrayed expectations, mostly due to poor controls; and Tokyo Mirage Sessions #FE, a niche title that lost even more of its player base thanks to censoring.

There has been no major Mario, Legend of Zelda or Metroid game to speak of, and their absence combined with everything else highlights just how badly weak Wii U sales have affected the company's profits.

A Mobile Future?

Nintendo is sticking to its guns about continuing to invest in mobile, despite all indicators suggesting that it shouldn't. Shortly after Pokemon GO released, the company's market value rose to the highest point it has been in quite some time, after investors mistakenly believed the hit AR game belonged to the Japanese game maker. However, that value has since dropped after Nintendo informed everyone that it only owns a 32 percent stake in the Pokémon Company, which licensed the game. Now, it looks like Nintendo has even more to lose in regard to Pokémon GO, since the Pokémon GO Plus (which it does own), has been delayed until September, meaning that it will miss out on the hype surrounding the game when it's near its peak.

Now, with the the truth about Pokémon GO exposed, all that's left is to consider the one mobile game that Nintendo is actually responsible for: Miitomo. The free-to-play app saw huge success early on, gaining over 10 million unique users worldwide. However, soon afterward, it lost approximately 75 percent of its user base due a lack of content. In fact, Nintendo's report indicates that income from smart devices (along with IP licensing) only amounted to $15.6 million last quarter.

This hasn't deterred Nintendo from trying to embrace a mobile future, though, and the company is still working on mobile versions of Fire Emblem and Animal Crossing — two IPs that have potential to do rather well on a smartphone.

What's Next?

Though earnings might be down, Nintendo is certainly not out. The company still has everyone's attention — and the potential for a better future — thanks to its upcoming console, codenamed NX. Recent rumors suggest the NX will be a portable console hybrid with detachable controllers, allowing players to play games outside as a handheld, and at home as a full-fledged console by docking the system into a TV. If true, it also alleviates two of Nintendo's biggest problems in one fell swoop: it replaces the disastrous Wii U, as well as the aging 3DS.

Furthermore, The Legend of Zelda: Breath of the Wild will be coming next year, and that will no doubt give Nintendo a much-needed boost on the software side of things.

All in all, Nintendo is waiting on its next big hit, and that can come in many different forms.

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Tags: Nintendo