Game fans hit Japanese stores early on Saturday to be among the first to get their hands on Nintendo's new 3D-capable game player, but the gadget's sales may be squeezed in the longer term by competition from smartphones and tablets.
The 3DS, set to launch in the United States and Europe in a month, has sparked excitement as the first games device to offer glasses-free 3D gaming, and it has the advantage of launching 10 months ahead of Sony's rival Next Generation Portable.
Nintendo, based in Japan's ancient former capital of Kyoto, is sticking to a tried and trusted formula -- a dedicated portable games device with software available on cartridges that cost $30 or more.
That worked for the original DS, launched in 2004, which appealed across the board from school children to the elderly. But casual gamers now have the option of free or inexpensive games available on mobile devices from Apple iPhone or based on Google's Android operating system.
Rival Sony Corp, whose PlayStation Portable (PSP) never caught up with the DS, has gone head-to-head with these upstarts, announcing last month it would make some games available on other companies' Android-based devices and offer a new development system for casual games, a strategy with its own risks.
Sony's offering of PlayStation games on other platforms means they will sell less hardware longer term, said David Gibson, head of equity research at Macquarie Securities in Tokyo.
Nintendo's competitive advantage is that they develop both hardware and software. I don't think you will see a change to Nintendo strategy longer term, but because of smartphones they will not see the same growth they once had, he added.
Nintendo expects no less than 4 million units of the 3DS to fly off the shelves in the five weeks to March 31. The original DS sold 145 million units worldwide to December last year.
Of course it will be difficult to sell more than the DS in Japan or other developed countries, said analyst Shun Tanaka of SMBC Friend Research Center.
But if they market it in regions like South America and Asia, it may eventually sell even more than the DS, he said.
On Saturday, gamers lined up at the Bic Camera electronics store in Yurakucho, central Tokyo, despite the fact that initial stocks of the new gadget sold out in a single day of pre-orders on January 20 and the 25,000 yen ($305) price tag.
I have been away from playing games for a while, but 3DS brought me back to it, said Hitoshi Yanagi, a 39-year-old from Kawasaki in the suburbs of Tokyo. What smartphones can do is different from what the 3DS can do -- it's not that either one is superior.
The launch is expected to hike Nintendo's sagging sales and anticipation has helped push the company's shares up more than 20 percent since they hit a 10-month closing low on October 15, two weeks after Nintendo revised down its annual profit and sales forecasts.
Speculation that Nintendo's President Satoru Iwata will make an announcement about the next-generation Wii home games console at the Game Developers' Conference in San Francisco on March 2, or at the E3 game show later in the year, has also helped power the stock's rise, though many analysts see the new home console making its debut in 2012.
Nintendo's share price hit dizzying heights over 70,000 yen in 2007, amid excitement over the then unbeatable Wii and DS. Operating profit peaked at more than 555 billion yen ($6.78 billion) in the year to March 2009.
The company is targeting an operating profit for the full year to March 31 of 210 billion yen, the lowest since the year ending in March 2006 and, despite new products, analysts' consensus has growth remaining sluggish for the following two years.
(Editing by Sugita Katyal)