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Last Updated: Thursday, 28 July, 2005, 11:09 GMT 12:09 UK
Profits tumble at gamer Nintendo
Game Boy Micro
Big players like Nintendo, Sony and Microsoft are battling for gamers' cash
Nintendo has seen quarterly profits tumble, hit by waning demand for its computer game consoles and the cost of launching new products.

Net profit for the April to June three month period fell to 14.12bn yen (72m; $126m) from 22.64bn a year ago.

In May, the company warned that profits would come under pressure from rivals such as Sony and Microsoft.

So far, demand for its new DS portable game machine has not been strong enough to offset waning GameCube sales.

'Costs are still high'

Total sales in the firm's first quarter fell 14% to 70.70bn yen.

Nintendo is the biggest maker of handheld gaming machines and said it sold 1.38 million DS consoles - which are made up of two screens, one of which is touch sensitive - in the first quarter.

The company, famous for its Mario the Plumber and Donkey Kong characters, said it still expected to sell 12.4 million DS consoles in the 12 months ending March 2006.

Nintendo DS console
Nintendo is optimistic about the outlook for its DS portable player

"The difference in profitability from a year earlier is due to the fact that it hasn't been long since DS entered markets so costs are still high," said Yoshihiro Mori, Nintendo's senior managing director.

He added that production needs to run for about a year before costs start to decline.

'The market is finished'

Demand for its Game Boy Advance, however, slipped to 980,000 units from 2.3 million in the same period a year earlier.

Sales of its GameCube console also declined and analysts said that this was due to the fact that many consumers had either been lured by rival products or were waiting for the release of Nintendo's new Revolution in 2006.

Takashi Oya, an analyst at Deutsche Securities, said that the GameCube was always outsold by Sony's PlayStation and Microsoft's Xbox. All three companies are due to launch new players.

"It just shows that the market is finished with current-generation models," Mr Oya said.

On top of that, Nintendo plans to release many of its most anticipated games in the second half of this year.

"I'm not worried," said Yuta Sakurai, an analyst at Nomura Securities. "This is a seasonally volatile industry and Nintendo's biggest games will come later in the year."

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