Sony (NYSE: SNE) is coming out with a new PSP. Should Nintendo (OTC: NTDOY) care? In a word: no.

According to reports, Sony will be releasing the PSP Go this fall. The big thing about the unit is that it will be small. Oh, and it will be driven by downloaded games and other content. And, quite honestly, I'm not sure it's going to offer up a lot of significant competition to the Nintendo DS.

Nintendo Co., Ltd. (OTC: NTDOY) is having a bad day. The price of its ADRs are down over 11% at the time of this writing. The catalyst? Well, the video-game giant, which has seen a new renaissance the last couple years with the incredible success of the Wii and DS platforms, has lowered its guidance because of currency issues and a belief that sales of the Wii could slow a bit (this article provides the details).

A strong yen is making things a little more difficult. Nintendo now believes it will earn $5.9 billion in terms of operating profit for its full fiscal year. Analysts thought that the company was set to earn a lot more than that. Furthermore, management has become conservative on Wii sales, believing that it will sell 26.5 million consoles instead of 27.5 million consoles (the flip side, though, is that it should sell more DS devices). So, even though Nintendo increased its operating profit by over 20% in the holiday quarter, Wall Street wasn't happy at all with the business.

Do you own Nintendo (OTC: NTDOY) in your portfolio? If you do, then watch out. According to Engadget, the latest Xbox 360 price cut from Microsoft (NASDAQ: MSFT) has been very successful, and it may wreak havoc on your position.

Engadget says that the sales data show a 100% increase in Xbox 360 sales during the first weekend of the new pricing structure. And this is important for those trading Nintendo. It's of course impossible to predict short-term stock movements, but I can tell you that I wouldn't be a buyer of the ADR's right now, not at these levels. As many have been saying, the game has changed now. It could be that this initial sales spike for the Xbox 360 won't last, and that the Nintendo Wii will still be king of the holidays. There's no question demand will remain strong for the Wii. It is a good system, after all, and it has a lot of brand momentum behind it. But now that consumers can get an Xbox 360 for less than a Wii (the former's low-end model can be had for $199 while the latter is still $250), and considering the fact that the Xbox 360 is technically superior to the Wii in terms of graphics power, I'd be pretty reticent about entering Nintendo's shares unless I saw a very significant pullback in price.

Nintendo is still going to make a lot of money (remember, it has the extremely popular DS hand-held powering it as well as the Wii), and Microsoft and Sony (NYSE: SNE) still have reason to fear the video-game icon. But if growth in the Wii slows, and if, heaven forbid, Nintendo needs to make a price cut of its own, then the stock could indeed reflect a more pessimistic outlook. It's a risk that needs to be carefully evaluated, since price elasticity may come into play here with a vengeance, especially during a softening economy. Like I say, I'd be uncomfortable considering Nintendo these days unless the shares get a price cut of their own.

Disclosure: I don't own any company mentioned; positions can change at any time.

According to The Wall Street Journal, "strong holiday sales of its Wii video game console and Nintendo DS portable game device helped Nintendo (OTC: NTDOY) nearly double its nine-month net profit and raise its sales forecasts for the third time this business year." In other words, there is no recession at Nintendo.

Figures out of Microsoft (NASDAQ: MSFT)'s device division would also indicate that there is no slowdown in video console sales. Nintendo raised its forecast for Wii unit sales for the year ending in March to 18.5 million from 17.5 million.

One of the questions Wall Street is asking is where the consumer will draw the line on purchases. Expensive products like cars are likely to get hurt. Fast food numbers seem to be fine. A video game console is a $200 to $500 purchase, with Nintendo's products being at the low end of that range.

One advantage video games have over other products in a downturn is that consumers can use them for hours a day, not unlike a TV. That puts the "cost per hour" of owning a video game products at pennies for avid users.

Does that make video games recession-proof? Probably.

Douglas A. McIntyre is an editor at 247wallst.com.

Nintendo has done extraordinarily well with its Wii game console. The Wii regularly outsells Sony (NYSE: SNE)'s PlayStation 3 and Microsoft (NASDAQ: MSFT)'s Xbox 360. But, the most successful Nintendo product is the older DS which, according to The New York Times, outsold the Wii, 1.53 million units to 981,000, in November, based on sales figures compiled by NPD Group.

What makes the figure more interesting is that the Nintendo DS is three years old. The DS is compatible with older Nintendo games, but does not have the "hot" new features of current devices like HD TV playback.

The success of the DS may point to a "rotation" in the video game sector, and that is a movement away from expensive and complex machines that have multiple functions, high prices, and harder to understand features. Keep it simple, stupid.

It would make some sense that the market for large, complicated machines would be limited. Playing video games appears to be of interest to a broad section of the population, but reading 300-page instruction manuals probably is not.

Douglas A. McIntyre is an editor at 247wallst.com.