Nintendo Co Ltd reported a 46 percent fall in quarterly profit, as sales of its aging DS handheld device tumbled ahead of the launch of a new, 3D-capable model next month.
The news came the same day Sony Corp unveiled a rival portable gaming device set to hit the market around the end of the year. Both firms need a new hit product to help them compete against Apple's iPhone and the growing ranks of rival smartphones.
Nintendo, based in Japan's ancient capital of Kyoto, has also been battling harsh competition from Sony and Microsoft Corp in the home game console market, after both companies launched motion-control accessories last year.
Underscoring the tough competition, Nintendo cut its sales forecast for the Wii console to 16 million units from 17.5 million units for the year to March. It also lowered its DS sales forecast to 22.5 million units from 23.5 million.
October-December operating profit at Nintendo, which competes with Sony and Microsoft was 104.6 billion yen ($1.3 billion), compared with 192.3 billion yen a year ago and versus an analysts' consensus of 118 billion yen.
For the year to March, Nintendo left its operating profit forecast at 210 billion yen, down from 356.6 billion yen the previous year and compared with a consensus of 203.5 billion yen in a poll of 25 analysts by Thomson Reuters I/B/E/S.
The company revised down its annual profit forecast by a third last September, blaming the strong yen and the fact that it did not have the much-anticipated 3DS ready for the year-end festive shopping season.
Nintendo shares ended 0.9 percent higher ahead of the results announcement. Over the past year, Nintendo shares have lost 12.5 percent, compared with a 0.7 percent rise in the Nikkei average.
(Reporting by Yumi Horie and Isabel Reynolds; Editing by Anshuman Daga and Edwina Gibbs)