The transition from one hardware generation to the next is never an easy time for a console maker's balance sheet, as sales of the old system start to taper off and investment in a new system has yet to pay off. Still, there are signs that Nintendo is handling the transition worse than could be expected.

The company reported financial results (PDF) for the quarter ending June 30 today that showed revenues plunging nearly 10 percent from last year, to ¥84.8 billion (about $1.08 billion). And while the net loss of ¥17.2 billion ($220 million) for the quarter was actually an improvement from last year's performance, it's still a worrisome sign for a company that had been consistently profitable for decades until just last year.

The main culprit continues to be drastic declines in sales of its most-popular console. Nintendo sold only 710,000 Wiis in the three-month period from April to June, less than half the 1.6 million moved during the same time last year, and well down from the record-setting pace of a few years ago. Nintendo is counting on a strong launch for the Wii U to help turn things around: the company expects its two home consoles to combine to sell over 10.5 million units for the fiscal year, which ends next March.

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