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Nintendo's fundamentals are already cracking. Through the first nine months of fiscal 2010, net sales have fallen by 23%. Operating profits have taken a crueler 41% haircut.
Things haven't gotten any better since those nine months ended in December. All three consoles introduced margin-denting price cuts heading into the holidays, hoping to make it up in software sales. It hasn't worked, as industry sales have fallen through most of the past year.
Not long ago, Nintendo was a champion of both the gaming industry and the stock market. Nintendo fans shouldn't worry that the company is in real trouble - Nintendo and its investors will be fine - but this may be a signal that the competition between the three hardware manufacturers is starting to tighten up. Last month, the Xbox 360 actually outsold the Wii, which hasn't happened since the launch of Halo 3 in September of 2007.
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