I enjoy video games, but I don't like playing games in this weekly column.

I own all three types of hardware consoles, but when it comes time to slam a stock -- as I do in this space every week -- it's not a game to those who own the stock I'm talking down.

However, I won't tell you it's "game over" without offering up some new diversions. I do rip into a single stock, but I come right back with three companies that I think would be superior replacements.

Who gets tossed out this week? Come on down, Nintendo (OTC BB: NTDOY.PK).

Not so super, Mario
There was a time when Nintendo rocked. The Wii was the must-have console, and its revolutionary motion-based controller got couch-potato gamers out of their seats and won critical acclaim from advocates of more active lifestyles.

However, a lot has changed -- and it's not just because Microsoft (Nasdaq: MSFT) and Sony (NYSE: SNE) have their own motion-based controllers hitting the market later this year.

Nintendo's fundamentals are already cracking. Through the first nine months of fiscal 2010, net sales have fallen by 23%. Operating profits have taken a crueler 41% haircut.

Things haven't gotten any better since those nine months ended in December. All three consoles introduced margin-denting price cuts heading into the holidays, hoping to make it up in software sales. It hasn't worked, as industry sales have fallen through most of the past year.

February was particularly disheartening for Nintendo. The PS3 and Xbox 360 experienced an uptick in sales, but the Wii suffered a sharp drop in units sold.

This trend may continue, even though Nintendo blames shortages for its softness.

In these multimedia times, the Wii stands out as the only console that doesn't play optical discs  -- the Xbox plays DVDs and the PS3 plays both DVDs and Blu-ray. It also doesn't have the sheer gaming power that's packed into rival systems. This wasn't a big deal when Nintendo was marketing itself to families and widening its demographics, but now that social gaming and ad-supported smartphone apps have created free outlets for casual gamers, Nintendo's simplicity is also its curse as hardcore gamers stick to Sony and Microsoft.

Smartphone gaming is also undoubtedly eating into Nintendo DS and DSi sales. So this isn't all about the Wii's recent shortcomings.

Nintendo is in the enviable position in which its most popular franchises -- Super Mario, Pokemon, Zelda, Wii Fit, and so on -- are proprietary. However, now that unit sales are falling and gamers seem to be preoccupied with other diversions to the point of needing fewer games, Nintendo has gone from leading the pack to chasing its tail.

Nintendo's Web-centered community lacks the Xbox Live sizzle. It has no answer for Sony's home-theater goodies.

Good news
As I do every week, I don't talk down a stock unless I have three alternatives that I believe will outperform the company getting the heave-ho. Let's go over the three fill-ins.

  • Apple (Nasdaq: AAPL): "My impression on iPad is that it felt like an introduction of a larger iPod touch, but nothing surprising," Nintendo President Satoru Iwata said during his quarterly briefing in late January. In other words, he doesn't see it as a threat to Nintendo's handheld business. I do. The iPad can quickly be loaded with free or dirt-cheap casual games, but economical connectivity plans on the 3G models take it places that Nintendo just can't reach. Apple disrupted the music industry with its iTunes Music Store, and now it's disrupting the softer end of the video-game space with its App Store.
  • Google (Nasdaq: GOOG): Ad-supported gaming has taken off at the casual level, landing online advertising giant Google in the sweet spot of monetization. As connectivity blankets the globe, it will also create more opportunities for gaming to move away from the console and simply onto the cloud. We'll see that in a few months with the launch of OnLive -- another potential Nintendo killer.
  • Activision Blizzard (Nasdaq: ATVI): There are really only two pure video-game companies I like at this point, and my nod of approval for Take-Two Interactive (Nasdaq: TTWO) is primarily as an acquisition target in this desperate industry. However, Activision Blizzard is the one software company for which the fundamentals can still woo a thinking investor. Its Guitar Hero franchise peaked a year ago, but it still has World of Warcraft owning the realm of online PC gaming, and its latest Call of Duty game continues to sell well, months after its initial release. Activision Blizzard trades at just 16 times this year's projected profit and less than 14 times next year's target. That's a great price for the class of the industry -- even if the sector appears stuck in quicksand.

Somebody tell Bowser that it might be time for his final curtain call.

Microsoft is a Motley Fool Inside Value pick. Google and Take-Two Interactive Software are Motley Fool Rule Breakers choices. Apple, Activision Blizzard, and Nintendo are Motley Fool Stock Advisor selections. Motley Fool Options has recommended a synthetic long position on Activision Blizzard. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Activision Blizzard. If you're into window shopping, try any of these newsletter services, free for 30 days.

Longtime Fool contributor Rick Munarriz wonders whether it's too late for Nintendo to save the princess. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.