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At first glance, things look pretty bad. Nintendo's results for the first six months of the current financial year - which, in Japan as in the UK, runs from 1 April to 31 March (officially because that's what the government does but we suspect it's because no one can be bothered to trawl through bags of receipts in the run-up to Christmas) - make for grim reading. Sales revenue was down 147.4 billion (£1.2 billion), a fall of over 40%. During the same period in 2010, Nintendo was hit with a relatively small loss of 2.01 billion (£16.6 million). One year later that had grown to 70.3 billion (£579.8 million) - almost 35 times as much.

Dig a little deeper and the picture becomes even bleaker. Of that 70 billion, 25.5 billion was lost in the first three months of the financial year; Nintendo lost even more money in the second quarter than it did in the first, despite the 3DS price cut in August and hardware sales tripling.

EXCHANGE EVERYTHING

What caused the loss? It's tempting to put it down to research and development costs; Nintendo are, after all, beavering away on Wii U ahead of its launch later this year. Unfortunately, R&D spend rose less than 2% from 2010, when Nintendo were putting the finishing touches to 3DS and, no doubt, also working on their Wii successor. Marketing, then? They had the 3DS to promote, after all. Nope: advertising spend actually fell by almost 10%.

The reality: it's mostly down to sales.

Nintendo were worst hit in the US, where revenue fell by 85.9 billion (£708.9 million) - a drop of more than 50%. Exchange rates also played their part. The actual value of currencies changes on a minute-to-minute basis, according to what's going on in the world. With much of the West trying to pull itself out of a financial crisis, and most European governments scrabbling down the back of the sofa to pay their bills, the euro, the US dollar and our pound are all struggling. The Japanese yen, however, is fine. This means that the £40 you spend on a Nintendo game is worth a lot less in Japan than it was a year ago.

This is something that's not just hitting Nintendo but all Japanese companies that are big exporters, and Nintendo said their losses due to foreign exchange rates alone came to 52.4 billion (£432.4 million). All of this led Nintendo to adjust their forecast for the full financial year and predict an annual loss, for the first time in 30 years, of 20 billion (£165 million).

It was thoroughly depressing stuff for Nintendo fans, and for company president Satoru Iwata. He'd soon get it in the neck from investors and analysts, who took one look at the achievements of Apple - who, following the success of iPhone, iPad and the App Store, were at one point last year worth more than the US government - and said Nintendo should move, or buy, into the smartphone market.

Just as it had after the Wii U announcement at E3 in June, Nintendo's share price tanked. Investors saw the company as a relic, unwilling or unable to adjust to a gaming landscape vastly changed by 69p smartphone apps. They sold Nintendo stock in droves, and when there's a plentiful supply of shares on the market, demand for them goes down, and so does the price.

Here's the thing: investors are idiots. Fickle, bandwagon-chasing dolts. During a tense investor briefing, one owner of Nintendo stock broke up the demands for the company to release Mario games on iPhone to say he didn't really have any interest in games. He'd just bought the stock because they were based in his birthplace of Kyoto and he liked the name Nintendo. That's what Nintendo were up against. Investors don't really have a clue - they're high-stakes, professional gamblers, who chase after the next big thing and get it wrong as often as they get it right.

That 20 billion loss needs to be put in context, too: Nintendo's rivals lose money all the time. Much was made about the fact that, after the price drop, 3DS would be sold at a loss; Nintendo were going to lose money on every 3DS sold. But Microsoft and Sony have built their videogame businesses on loss-making hardware. We can never really tell when Sony make money from PlayStation - they have fingers in too many pies for us to find out specifics - but we do know that the Xbox project was almost seven years old before Microsoft's Entertainment & Devices division made an annual profit. The Xbox 360 'red ring of death' fiasco alone cost Microsoft about a billion dollars - six times the loss Nintendo have told us to expect.

Microsoft and Sony would tell you that they can afford to take a loss on hardware because they also sell PC software, phones, TVs, laptops and so on; Nintendo only have games, and if they can't sell consoles or games any more, they're in trouble. It's a fair point, so maybe we should look at some other companies whose sole business is games: publishers. Electronic Arts? Fifteen losses in the last 20 quarters. Activision? In the last three months of 2010 they set sales records with Call Of Duty: Black Ops and World Of Warcraft: Cataclysm, but took a loss of $233 million and laid off 500 staff.

TURNING THE CORNER

Still, a loss is a loss, and the fact that Nintendo have never done this before means they must be in trouble, right? Wrong. Buried in reams of financial data is the revelation that Nintendo have 812.8 billion (£6.7 billion) in the bank - enough for it to take a 20 billion loss every year until 2052.

Then there's almost 469 billion held in premises, equipment and investments. When that runs out - we're in the year 2075 by this point - they've got some of the most valuable intellectual property in gaming to sell off before the company goes out of business.

In any case, much has changed since last autumn. Back then, Iwata pleaded for investors' patience, saying Nintendo were confident of a strong close to the year. And so it's proven: 3DS has been the best-selling hardware in Japan every week since the price cut in August, and more than four million systems have now been sold in both Japan and the US. More than two million copies of Super Mario 3D Land and Mario Kart 7 have been sold worldwide. There's life left in the Wii, too, with over half a million units sold on America's baffling annual retail splurge, Black Friday, and Skyward Sword becoming the 45th Wii game to sell a million copies in the States.

It might not be enough - exchange rates are still a problem, and without knowing the size of the loss on 3DS hardware it's impossible to predict whether Nintendo can defy expectations and turn a profit. We'll find out in April, when their full-year results will be revealed. 2012 will be a whole new challenge - Nintendo need Wii U to succeed immediately, and they must sustain 3DS's momentum - but the last few months have shown that they still know what they're doing, despite what crazy investors think.

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