Both Nintendo and Sony reported results this week and heading into the crucial Christmas period, the contrast between their fortunes could hardly be more stark.

Nintendo, which overtook Sony in terms of market valuation in May, has continued its upward march after increasing its forecast for the number of Wii and DS devices it will sell this year.

The games company behind classic characters such as Super Mario, Donkey Kong and Zelda, is now the second most valuable company in Japan, trailing only Toyota.

Meanwhile, shares in Sony, which has lost almost 30% of its market value since May, slipped further after the company admitted it could miss its sales target for its flagship PlayStation 3 console.

The reversal of fortunes within the games console sector has been highly unexpected given Nintendo's Wii was tipped to struggle to compete with its competitors. With Nintendo's GameCube flopping only four years ago, many observers wondered whether it had a future in the console market and whether it should instead focus its energy on handheld devices, due to the success of its GameBoy series, and developing more hit games around Mario and his adventures.

The failure of the GameCube . . . which went head to head with Sony's PlayStation 2 and the original Xbox . . . triggered headlines proclaiming that Mario . . . the animated plumber that symbolised Nintendo's dominance of the market in the 1980s . . . had finally run out of tricks.

The company's valuation collapsed as analysts fretted that Microsoft's entry into the games sector may have been terminal for Nintendo.

Nintendo's demise was attributed to a serious strategic error as analysts derided its attempts to target older gamers and a more mainstream audience at a time when sales of violent action games such as Halo and Grand Theft Auto were all the rage.

Yet Nintendo stuck to its guns and despite concerns that the Wii would be another also-ran compared with the PlayStation 3 and Xbox 360, the console has sold like wildfire and proved the doubters wrong. It has outsold the PS3 threeto-one in the Japanese market and five-to-one in the US and has taken the PS2's mantle as the fastest selling console in history in the UK after shifting 1 million machines in just eight months.

The Wii has reinvigorated the video games sector by appealing to consumers outside the "hard-core" gaming market, particularly female gamers and families. While titles such as the ultra-violent Grand Theft Auto: San Andreas sold well to traditional fans, Nintendo recognised that there was a vast untapped market of people who wanted more simple and fun games.

The Wii's motion-sensorbased controllers revolutionised the market by allowing consumers to physically play simple games such as tennis and ten-pin bowling on the screen.

David Yarnton, managing director of Nintendo UK, said the decision to target non-traditional gamers has led to household penetration of consoles rising for the first time in 25 years. "Nintendo has identified that the computer gaming market had started to stagnate and despite increasing sales, the household penetration of consoles had remained flat at around 30% for many years. We were selling more as an industry, but we were selling more to the same narrow audience of committed gamers, " he said.

Yarnton said the complexity of controls and the amount of dedication that most games demand act as barriers to many potential players who simply do not have the time every day to devote to finish a game. He said that by making the controls of the Wii, and the handheld DS console, more simple and allowing "snack-style" play sessions, a style of game play had been created that better fits with people's lifestyles.

Michael Gartenberg, an analyst with Jupiter Research, said: "Nintendo has redefined the notion of how video games are played and, more importantly, who plays them. It went back to the drawing board and said 'it's not The success of the Wii and the DS was evident in Nintendo's first-half results, with the company reporting a net profit of �506m, almost three times higher than at this stage last year. It sold more than 7 million Wii consoles and more than 13 million DS devices in the first six months of the year, and upped its forecasts for shipments over the year for a second time. It now expects to sell 17.5 million Wiis and 28 million DS units this year.

Nintendo's resurgence proved to be bad news for Sony, which has spent years gearing the market up for the launch of the PlayStation 3 . . .

the most advanced games console ever developed. The machine also contains a BluRay high-definition DVD player and microprocessor that has been described as a "supercomputer on a chip" that offers the most advanced graphics. However, the cost of such technology meant the PS3 was launched at more than twice the price of the Wii.

Sony's figures showed that a loss of 97bn yen related to the PS3 was much wider than expected. Sony was also forced to admit that it may not hit its 11 million sales target for the console this year.

Both Sony and Microsoft have slashed the price of their consoles over recent months to boost sales, but Nintendo denied it would lower the price of the Wii as a result. Even after factoring in the price cuts, Sony expects the new PlayStation to break even next year.

Howard Stringer, the chairman of Sony, has denied that the PS3 has proved unappealing to consumers.

He attributes the console's slow growth to a lack of games that utilise the machine's improved functionality on launch, a problem set to be solved with around 200 titles now available. Yet heading into the Christmas period, analysts were pessimistic about Sony's chances of making up the lost ground. While Microsoft has kick-started sales of the Xbox 360 with the launch of Halo 3 . . . a must-have game that achieved sales of $300m in its first week . . . Sony has yet to convincingly detail how it intends boost sales of the PS3 over Christmas.