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OceanJ on 08 January 2013
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In preparation for the Q3 & Annual Reports here's a consolidation of the good & bad for Nintendo - on the numbers:

  Projection April 1 2012 - March 2013 As of December 29th My Estimate
Wii U Hardware 5.5 Million 2.45 Million 4.75 Million (Miss by 750K)
Wii U Software 24 Million 5 Million 15 Million (Miss by 9 Million)
3DS Hardware 17.5 Million 10.97 Million 15 Million (Miss by 2.5 Milion)
3DS Software 70 Million 32.48 Million 55 Million (Miss by 15 Million)
Wii Hardware 5 Million 3.57 Million 5.2 Million (Exceed by 200k)
Wii Software 50.5 Million 57.78 Million 80 Million (Exceed by 29.5 Million)
DS Hardware 2.5 Million 2.8 Million 3.8 Million (Exceed by 1.3 Million)
DS Software 37 Million 35.5 Million

43 Million (Exceed by 6 Million)

 

Inferences:
  • The cheaper Wii and DS systems are exceeding expectations and cannibalizing to an extent, 3DS & Wii U sales, due to price-points and a weak global economy.
  • Wii & DS Software sales balance out Wii U & 3DS software misses
  • Overall Hardware Unit Sales will miss projections
Also of Note:
  • Nintendo projected a Yen of 80/$1 US, and 100/ 1 Euro.  Actual figures closer to 85 & 110, translating to higher profits.
  • 3DS sales are down in 2012 year-over-year in the U.S. by 600,000 units, even though it had 3 more months on sale vs. 2011.  Disconcerting.
  • 3DS sales similarly are down in Europe by 3,000 units YoY - though it had 3 more months on sale vs 2011. Bad.
  • Wii U is selling poorly in Europe.  The price is too high, economy is hurting, marketing is lacking.
  • Given the inevitable misses on 3DS & Wii U hardware & software, despite better than expected sales for Wii & DS, Net Sales projection of 800 Billion Yen will be missed.  Nintendo posted 200B Net Sales as of Sept 30.  They've never posted a 4x multiple of Net Sales as of March 31.
  • 3DS sales globally are up YoY by 500k units, thanks only to massive numbers in Japan.  But Japan cannot keep carrying the load for decline in US & Europe.
  • 3DS hardware has been selling for a profit since September. With the majority of sales over the holidays, a big win for Nintendo translating to big profits.
  • It was reported that the Wii U in fact is not profitable after 1 game sale.  We don't know how much money Nintendo is losing per console, and if it will be profitable in Q3.
What can we conclude from this?
A) Nintendo should post a profitable Q3 overall.  It's nearly impossible to imagine a scenario where this doesn't happen, given the weakening Yen, the offset of expenses from respectable (though off-pace) Wii U sales,  strong Wii, DS, & 3DS sales
B) There is a reasoned chance given the poor showing of Wii U & 3DS per Nintendo's own projections, that Nintendo will not post an Annual Profit for FY2012, and instead post the 2nd back-to-back annual loss, the first time in company history that would happen
C) There is also a reasoned chance Nintendo will turn in an Annual profit and meet the 6 Billion profit projections, given the weakening Yen and better than expected Wii & DS sales.
For Nintendo's Shares, I expect them to decline further from today's 52 week low, and bottom out close to $11 / share.  But once Nintendo posts Q3 profits they should see a bump with everything else remaining the same.  The biggest ongoing risk for Nintendo are weekly Wii U sales numbers.  If they do not hold steady investors may choose to abandon the stock regardless.