I think the big mistake he made, aside from his over-estimation of 3DS and Wii U, was to even promise a 100 billion yen operating income. You do not promise such high amounts when your loss-producing home console has just lost momentum and has no software to make up for it (not to mention increasing R&D, building a new studio, etc). He should have told investors that his biggest priority was to get the system into as many homes as possible in 2013 (giving the greater ability to price the system effectively) and focus a year (2014) entirely on software.

Iwata had stated that his goal was to increase the value of Nintendo in the long-term; building a new studio was a good move, combining hardware units was another good move, increasing R&D in hardware to replace their current hardware was another good move, not abandoning hardware and running to software was a great move, but all of this is now at risk because Iwata decided to promise something that could not be delivered.

A lot of the predictions I am making on this forum assumes that Nintendo is being lead by Iwata and current management, but last year (after return to some profitability) Iwata's approval rating dropped from 90% to 78%. This year I am unfortunately anticipation a shareholder revolt in June. And that will most likely push Nintendo to places which is not good for it in the long-term.

Well, I hope they can figure this out soon. 3 years without profit is scary for any company. They really need to focus on games that have more wide appeal beyond Japan.

i thought they made a profit in 2012?

Nintendo posted an operating loss, but net profit.

Which in layman's terms means their actual video game business suffered a loss, however because of a favorable yen/dollar flucuation, they come out with a small net profit in the end. 

This will be Nintendo's third consecutive operating loss in a row, previous to this they had never suffered an operating loss before. 

I think honestly they probably will lose money again next fiscal year too ... no Pokemon X/Y, probably lower YoY 3DS sales, Wii U sales will improve but will still remain dissapointing I think and they probably need another price cut from $300, which will incur more bleeding from hardware. 

They devaluation of the yen has been helping them.