Once the master of the game, Nintendo (NTDOY) has fallen behind in the gaming industry. It reported a 46% drop in profits in its recent quarter, as reported in Reuters. Nintendo is trying to do "catch up" with rivals Apple's (AAPL) iPhone and Google's (GOOG) Android, both or which have strong gaming platforms.

Nintendo is launching the first handheld 3D gaming system without glasses later this month. Nintendo of America's president, Reggie Fils-Aime, expects that the 3DS will sell even faster than its original DS device, which sold 150 million units to date.

If you took a look at the very recent movement in Nintendo's (NTDOY) American Depositary Receipts (ADRs), you would probably come away thinking that they could be a buy. Hey, they very well could be.

However, if you took a look at a recent Reuters article, you might suddenly question the idea of stocking up on those very same ADRs. That's because, simply put, the cultural status of the Wii seems to be further weakening. Not only that, but the extremely popular Nintendo DS handheld system is facing increasing competition from other devices.

Nintendo (NTDOY), whose competitors include Microsoft (MSFT) and Sony (SNE), has had a couple of rough trading sessions. It has to do with disappointment surrounding the release date of the Nintendo 3DS hand-held system -- which will miss the holiday season -- as well a bad profit outlook (I'm presuming the latter issue was more responsible for the bearishness than the former one).

My colleague Gary Sattler gave his opinion on the situation the other day. The question is, should an investor buy the company's American Depositary Receipts (ADRs) on pullbacks? What kind of opportunity do they represent? Yesterday, they closed down 4.9% to $31.20. Volume was very heavy.

This winter should be an exciting time for video game companies. Unfortunately, at the moment fan favorite Nintendo (NTDOY) is powering down.

Nintendo announced revenues of only ¥189 billion, much lower than the consensus estimate of ¥212 billion. Earnings came in at a ¥197 loss, widely missing the consensus estimate of ¥34 billion.