Nintendo loses grip on handheld gaming, drops into loss

The next-generation Nintendo DS will have to face competition from games on smartphones,

Nintendo reported a 2.01 billion yen (US$24.6 million) net loss for the six months to Sept. 30, as its sales of hardware and software dropped, the company said on Thursday. It sold 42 percent fewer handheld game consoles than a year earlier.

The loss compares to a profit of 69.5 billion yen during the same period last year. Sales of 363.16 billion yen were down about 34 percent compared to a year earlier.

The main reasons for the swing from profit to loss is flagging sales -- of Nintendo's Wii console, of its DS family of handheld consoles, and of related software. Results were also affected by a stronger yen, the company said.

Nintendo sold 6.69 million DS-family consoles during the six-month period, including 2.26 million DSi consoles and 3.21 million DSi XL consoles. In the same period a year earlier, before the launch of the DSi XL, it sold 11.7 million DS-family consoles.

Sales of the Wii dropped less, from 5.75 million units to 4.97 million.

The product that may help the company turn around its fortunes is the portable 3DS, which will allow players to see games in 3D without the use of special glasses. However, the product won't go on sale until next year, missing the important end-of-year holiday shopping season.

Also, the 3DS will enter a market that is very different from when the original DS launched in 2004: More of Nintendo's target market are playing games on smartphones. Reports have also recently surfaced that Sony Ericsson is working on a PlayStation-branded smartphone based on the Android operating system, which would further intensify the competition from smartphones for gamers' attention.

To be able to compete, Nintendo's stand-alone portable consoles will likely have to add more features besides gaming, though they don't necessarily have to become full-fledged smartphones, according to Richard Webb, directing analyst at market research company Infonetics. He thinks that the PlayStation smartphone will become a reality, but that its success -- and that of Nintendo's 3DS -- will be determined by the availability of good games.

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Mikael Ricknäs

IDG News Service
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