It could definitely be doing worse. If SM3DW hadn't released, if it hadn't had Pikmin and W101 over the summer, we'd essentially have an expensive, bland, 2D Platformer machine that even people like me wouldn't really like. As it is, it actually has some good content now, just not the kind of stuff that makes mainstream joe or casual sally spunk their pounds and dollars up the wall.
Its squashed between the cheap and still-performing 360/PS3 and the new gen launch at the moment, and too pricey to be considered an alternative to contract-subsidised smart devices. It obviously needs a price adjustment in time with good content if they want to stimulate sales. It needs the same kind of concerted push that 3DS has been enjoying this calendar year. Without it I don't see how anyone has expected good performance out of it TBH. I expected it to struggle even more than it did in November. I think it'll have a marginally better December, but not by much.
They shouldn't be looking at Gamecube or Dreamcast comparisons and resigning themselves to a parabolic curve of early death though. I see plenty of people saying they effectively want to 'want' one. That they'll jump in when its cheap etc. They should be looking at the example of the 3DS specifically, and the PS3 - on how to stimulate sales after a relative PR and marketing disaster. Sony's PR this last year has been masterful. I don't know which is worse -- Microsoft's fumbling of a perfect opportunity to gain ground, or Nintendo's complete inaction in the face of disaster... If they bring their A-game from Monolith, Retro, EAD's Zelda team etc. next year, and those along with Mario Kart don't effect some sort of improvement, then they maybe need to start thinking about how the fuck they can ever hope to sell a successor. If they don't repair relations with retail and the media, I'm not really sure they can.