There is the reason for the loss that has been posted.

Yes, sales have been down on software and hardware, but that's not strictly limited to Nintendo. They are still running on a profit, and if they hadn't booked the foreign currency loss, they would have had a profit of $527 million (45.5 bn Yen), which would have been UP on the year before.

However, it made more sense to covert their currency during their quarter financials than during their annual financials, as the loss from this conversion would have been minimised by doing that.

Nintendo also mentioned a lack of new games, as well as a big drop in hardware and software sales, but I guess you glossed over that part.

Meanwhile, Sony posted a profit at the same time. Why? Production costs dropping while rising demand for their hardware.

Yes they did mention a drop in hardware and software. However, they were running at a bigger profit than the same quarter last year until they added the foreign currency exchange.

Sony did report a profit, you're right in saying that. However, Sony will, at some point, have to convert to Yen also, and will have to do the same one-time conversion loss that Nintendo did. Seems that they are keeping that until their year end, which is probably a bad idea. Nintendo did it now, because the last quarter is generally one of the quieter ones, and it means that all their Xmas profits are safe.

Let's not gloss over the fact that SCE still did report a loss despite the increase in PS3 sales. They blamed the large loss last year on the weak currency, which is probably why they chose not to convert at the same point this year.