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Will Nintendo Stop Wii U Production to Focus More on NX?

The curtain might be coming down on Nintendo Co. Ltd.’s NTDOY flagship video game console Wii U.

According to reports by Japanese newspaper Nikkei, the company plans to stop manufacturing its video game system by the end of 2016. Reportedly, the company no longer produces certain components of the device. However, soon after Nikkei’s report, a Nintendo spokesperson announced to IT Media, another Japanese media firm, that it would continue the Wii U production.

Nintendo had troubles with the Wii U right from the beginning as a faulty system update barred customers from playing games for a span of one to five hours. Further, periodic system outages added to the woes. Also, the Wii U device’s name was almost the same as its predecessor, which confused buyers. Moreover, a large number of tablets were launched at the 2012-end, which increased the already intense competition.

In fact, the Japanese video game company has been losing ground to Sony Corporation’s SNE PlayStation and Microsoft Corporation's MSFT Xbox for quite some time. Further, the shift to smartphone gaming worsened the situation for Nintendo. In fact, the Wii U – launched in 2012 – has been the company’s lowest selling gaming console and substantially lagged sales of the PlayStation.

2015 has not been particularly rosy for Nintendo with both its gaming consoles – Wii U and 3DS –underselling, and the release of two of its biggest games – Star Fox Zero and The Legend of Zelda – being postponed to 2016.

The company is hoping to turn around its fortunes with its next  video game device – currently codenamed NX – set to be launched at this year's E3 in June in Los Angeles. Recently, the company has been focusing on mobile technology with the recent debut of its mobile app, Miitomo. The app was a runaway success with 100 million users signing up within three days.

If Nintendo chooses to halt production of Wii U, we believe it will be a step in the right direction. It would help the company cut down its losses and focus more on the new system.

Nintendo currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is Activision Blizzard, Inc. ATVI sporting a Zacks Rank #1 (Strong Buy).

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