At the Nintendo World store in New York City's Rockefeller Center, shipments arrive nightly. In the wee hours customers begin lining up around the block. Doors open at nine, and a few hours later the consoles are gone. In the world's gadget epicenter, Tokyo's Akihabara district, shopkeepers complain about the lack of inventory. Wii displays are covered with SOLD OUT signs, while piles of PlayStation3 boxes carry a different message: 5 percent OFF. Even the Nintendo of America company store near Seattle sees lines of employees, visitors and contractors. Forget about lucking into a Wii at your local Best Buy (Charts, Fortune 500).
It's not unusual for a new game console to sell out during its pre-Christmas introduction, only to see sales dwindle come January. But six months after the Wii's launch, sales are accelerating. Nintendo sold 360,000 boxes in the U.S. in April, 100,000 more than in March. That's two Wiis for every Xbox 360 and four for every PlayStation3.
While Sony (Charts) and Microsoft (Charts, Fortune 500) lose money on hardware in hopes of seeding the market with their consoles, analysts say Nintendo makes about $50 on every unit. It may not sound like much, but the company plans to sell 35 million of these things over the next few years. That's $1.75 billion in potential profit. Add that to the ridiculous earnings from the company's handheld gaming device, the Nintendo DS, as well as software sales and licensing revenue, and you begin to understand why Nintendo's market cap just passed $45 billion, an all-time high. (Nintendo (Charts) trades on the Tokyo and Kyoto stock exchanges and as an ADR in the U.S.)
More difficult to comprehend is how a company founded 118 years ago as a maker of playing cards in Kyoto came to be pummeling Microsoft and Sony. The answer has something to do with reinvention.
