The numbers come from it costing Nintendo $100-$200 to manufacture a Wii system through a manufacturing firm and the need to enter into 'long term' manufacturing contracts ... Nintendo has to pay for these systems regardless of whether they sell or not.

Nintendo is a fairly conservative company and I expect they are worried that if they produce an additional 250,000 to 500,000 consoles per month they will soon meet demand and have a production surplus; if they're in long enough contracts this could work out to being up to a 10 Million unit inventory which cost Nintendo $100 to $200 to produce (a $10,000,000,000 to $20,000,000,000 inventory of unsold Wii systems)

The contracts that Nintendo would have to enter into in order to increase production are large enough to require board approval; they are probably only going to approve of increases that do not put Nintendo at risk of overproducing at a level where they can lose billions of dollars in 1 year.

Aren't you miscalculating by a factor of 10? 3,000,000 * 100 = 300,000,000

And 250k consoles per week is 13 million consoles per year. So that's 1.3 billion to 2.6 billion dollars.

If you meant 250k per month, it's 300 million to 600 million dollars per year.

 Additionally, 250,000 * 52 = 13,000,000.  Unless I missed something about a year being only 12 weeks

Oops, I had just edited my post to say the same thing. Although I suppose he really meant 250k additional consoles per month?

250,000x52=13,000,000

off by 10 million. That's a HUGE difference.

I think his point still stands that the initial costs of manufacturing a year's worth supply of Wiis at current rates would be over $2 bn. You need to build uop cash reserves before you can expand significantly on that.

That's assuming the $180 figure is correct; I'd actually heard higher quotes, like $220. It's not unreasonable that costs have dropped somewhat, though.

Although, honestly, a company with solid financial rep as Nintendo rarely has to pay up front.  Usually, there would be 30% max up front, but that can be waived for large accounts like Nintendo.

Besides, didn't they report somewhere that they had 7 billion dollars in cash?

I think that it's the board that is being extremely conservative in their investments 

If they tried to sell all of their stock now, space-time would be destroyed by the size of the sales figures.

It's true.

With the Wii's current streak, I think they could afford to confidently add that kind of production ramp-up.

Not that it wouldn't take time, but I'm certain software revenues would cover the costs and then some.

Not to mention the viral marketing of the Wii being in THAT many more households, heh.

I think I made some stupid mistakes :(

I was switching between Weeks and Months to make my point and got confused while doing calculations in my head ...

250,000 units per month -> 3 Million systems per year -> $300,000,000 to $600,000,000 expense