The video game industry tends to jump on Nintendo's stumbles as a sign of impending doom at the company.

Why? Because it is still improbable to hardcore gamers that cutesy, whimsical Nintendo would find so much success in the marketplace. Game players like to shoot stuff. They don't want to tend a virtual village or play a game devoted to exercising. Right?

And so it was hard to fathom why the Nintendo Wii console became such a hit. But the demand for the Wii and its novel gameplay was so great that Microsoft (MSFT) and Sony (SNE) rushed to develop similar motion-sensing technology and games.

Now, the Wii's momentum has slowed dramatically. And Nintendo is running into skepticism and doubt that it can recapture the market-changing dominance that the Wii brought.

Even Nintendo has been caught a little off-guard. The company said Friday it was surprised by a recent dropoff in sales for the Wii, according to The Wall Street Journal.

This week, the company said it now only expects to sell 20 million Wii consoles for the year ending March 31. That's a 23% drop from the previous forecast. Wii game sales estimates also took a double-digit hit.

"Right now, the mood is not one where people feel like they have to rush out to buy a Wii, so we need a little time for things to pick up," President Satoru Iwata told analysts, according to the Journal.

That's classic Iwata speak. Whereas executives at Microsoft or Sony would refuse to even acknowledge a sales miss in public, Iwata confronts the situation head-on and promises improvement.

Nintendo can't make every game a hit, Iwata said at an analyst meeting. But the company will continue doing what it's doing, and future hits will come.

"The message we can give to the market is that you have to look at our track record and believe that we can introduce software that will be a hit," he said.

Don't underestimate Nintendo's savvy here. The company could make a game about cleaning the kitchen sink a blast. It may be down, but it's not out.