It was only a few years ago when Nintendo was on top of the video game world. Now, as the Wii and DS markets slow and the 3DS fails to set the world ablaze, the company has posted a $927 million loss.

Are investors overreacting? It depends who you ask. Wedbush Morgan analyst Michael Pachter says "things really are that bad."

Pachter reiterated that the weakness of Nintendo's console strategy does not bode well for the company. He explained to Eurogamer that the weakness of the 3DS is hurting Nintendo the most right now. "It's pretty clear that the potential for Nintendo handhelds is smaller now than it was when the DS was launched," Pachter said, "and software sales are going to continue to suffer, as the value proposition of 'shovelware' on the handhelds has declined precipitously with the emergence of free-to-play and $0.99 games on iPods and smartphones."

Screen Digest analyst Piers Harding-Rolls is a little more optimistic, saying it's "too early to call the death knell for the 3DS." That said, he points out that this holiday season will be "key in convincing third parties to increase investment in the platform." He suggests that even if this holiday goes well for Nintendo, major third-party investment might not come until late in 2012.

Meanwhile, M2 Research analyst Billy Pidgeon cites the yen's strength against the dollar as a major cause, and says that "strong yen may continue to plague Nintendo and other Japanese companies." He says that "the pressure is on for Wii U," and the system will need both strong hardware sales and a better attach rate than the Wii. He doesn't think the Wii U will be the breakout success the Wii was, but a good attach rate could compensate.

As an impact on the industry as a whole, Pachter believes that the Wii U will be the bellwether for Microsoft and Sony. "The Wii U will either succeed early, forcing Microsoft and Sony to accelerate the launches of their respective next generation consoles, or will sell only modestly, allowing Nintendo's competitors to launch later."