In a rare admission of setback, the president of Nintendo Co. acknowledged Friday that he misread the pace of change in the gaming industry caused by the spread of smartphones, saying it was time for a business structure rethink. But that doesn't mean Nintendo is ready to abandon its console-centered strategy.

Despite price cuts and the launch of some of Nintendo's hottest game titles, year-end holiday sales of the company's flagship Wii U videogame console were tepid. The company was forced to slash its annual sales forecast...