bbsin,
For handhelds the software/hardware revenue ratio was actually higher than for consoles in 2007, meaing that in the handheld business, software sales mattered even more for Nintendo than in the console business.
This certainly wasn't the case that much with former GameBoy generations, but the DS is a very strong software seller. Nintendo not only sold 65 million DS, they also sold 330 million DS games, which at $10 profit per game would match your estimation for DS hardware profits.
By the way, are you talking about $50-$65 margin, operating profit or net profit per DS? That's a hell of a difference. Nintendo's gross margin is above 40 %, their operating profit is above 20 %, their net profit below 20 %. If you say there's a $50-$65 margin for each DS sold, this would be around the Nintendo average (that includes both hw and sw), and if you say that there's a $50-$65 operating profit in each DS sold you'd be kind of unrealistic. That would put the hardware cost for one DS at $5-$20. Is that what you're suggesting?
The main problem with your position is that you can kind of guess Nintendo's expenses related to hardware production (through iSuppli) and then deduct their hardware profits, but no source tells you how much Nintendo spends per title on software development, so there's no way you can estimate their software profits and declare that they are lower than hardware profits.
Hardcore gaming is a bubble economy blown up by Microsoft's $7 $6 billion losses.
