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Analysts: January Sales Slump 'Disconcerting', Wii Supply To Blame?

Wedbush analyst Michael Pachter says the industry's return to double-digit declines is "disconcerting," and he blames Wii supply constraints -- while Cowen analyst Creutz sees software market softness.
NPD results for January fell far below analyst expectations -- although most had widely forecast a single-digit decline, weakened software sales led to a 13 percent year over year overall slump. "It seems that monthly software sales declines will never end, with January marking the 10 month of sales declines in the last 11," says Wedbush's Michael Pachter, saying a return to double-digit decline is "disconcerting." "The magnitude of the decline in the face of a solid software lineup gives us pause," he says, chalking up some of the large decline to "lackluster" Wii sales -- which he blames on supply constraints. Nintendo recently conceded that maintaining Wii inventory has been a 'challenge' recently. "Nintendo’s monthly hardware sales have been quite volatile, with outrageously high figures in December for the DS (3.3 million, up 9 percent year-over-year) and Wii (3.8 million, up 77 percent) followed by outrageously low figures in January (down 17 percent and down 77% percent respectively)," Pachter notes. "The combined decline in Wii and DS hardware was over 300,000 units, suggesting that the two Nintendo platforms contributed to a year-over-year decline of around $30 million in software sales overall," he adds. Cowen Group analyst Doug Creutz says instead the decline is caused by lower-than-expected software unit sales and weak catalog sales: He'd estimated 825,000 units for Electronic Arts and BioWare's Mass Effect, but the title only moved 624,000 units, for example. He says Army of Two: The 40th Day as well as THQ's Darksiders are other examples of underperforming titles, and notes Activision also saw a sales decline larger than estimated.

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