It's not like they didn't warn us. Since last November, Nintendo has been warning that the fiscal year which just wrapped up in March would show the first full-year loss in the company's history. Still, the net loss of ¥43.2 billion ($533.8 million) reported today was twice as high as the company's November estimate, and a major turnaround from over ¥77.6 billion ($958 million) in net profit last year.

Nintendo placed some of the blame for the downturn on a historically strong yen, which lowered the apparent value of sales made abroad. Most of the poor performance, however, rests squarely on the shoulders of the 3DS, which saw initially weak sales force a drastic early price drop that ate into expected profits. That price drop helped turn 3DS hardware sales around— the system has now sold a healthy 13.53 million units worldwide—but software sales for the 3DS are still not quite where Nintendo wants them to be, despite the release of big-name titles like Super Mario 3D Land and Mario Kart 7 last holiday season. The company blames this state of affairs on weaker-than-normal holiday spending in the US and Europe (read: recession), but companies like Apple aren't using that excuse.

The fiscal results put added pressure on the launch of Nintendo's Wii U, expected later this year, but the company doesn't seem terribly optimistic that the new console will turn things around immediately. Nintendo projects it will only sell 10.5 million consoles combined between the Wii and Wii U in the next fiscal year, which is only a small increase from the 9.84 million Wiis sold worldwide in the last year. Overall home console software sales are expected to decrease more than 30 percent over the next year as well, with Wii U early adopters being dragged down by the Wii's continuing long, slow decline.

Instead, Nintendo says it expects growth in the 3DS market will help it return to a healthy profitability next year. For one thing, Nintendo says it will start making a profit on 3DS hardware again sometime in late 2012, presumably because of decreased manufacturing costs. For another, the company expects 3DS hardware sales to increase by nearly 50 percent and software sales to more than double over last year, thanks to a planned Asian rollout and game releases like New Super Mario Bros. 2, Animal Crossing, and a new Brain Age focusing on increasing players' "concentration power" and "working memory."

But some think Nintendo is being a little unrealistic on this score. "I found the handheld hardware and software outlook to be overly optimistic, as they expect year-over-year growth in each category in the face of competition from PS Vita and increasing smart phone/tablet penetration," Wedbush Morgan analyst Michael Pachter told Ars. "I think that the best case is that handheld hardware and software are flat year-over-year, and the likely case is that they see declining sales."

If that happens, Nintendo is going to have to need a truly explosive launch for the Wii U to realistically return to profitability in one year's time. Even if it can't, though, there might not be reason for the company to panic quite yet. Pachter noted that Nintendo's hefty cash reserves, which swelled during the Wii's salad days, are enough to sustain ten years of its current losses. If those losses continue to increase at current rates, though, Nintendo could have a real problem on its hands.