For Nintendo Co, the world's second-largest video-game maker, the timing of Nokia Oyj's entry to a US$3 billion hand-held market long dominated by the Japanese company couldn't be worse.
The move strikes at a business that Nintendo is counting on to offset GameCube home consoles, sales of which will be 17 percent below originally forecast this fiscal year. Laggard sales helped drive down Nintendo shares 45 percent in 12 months.
"The market for multi-functional devices with gaming functions will be competitive," said Yoshihisa Okamoto, who helps manage Japanese Yen 221 billion (US$1.8 billion) at Fuji Investment Management Co, which holds Nintendo shares.
Nintendo president Satoru Iwata's company "will have difficulty widening its base to those using such gadgets," Okamoto said.
Game Boy and related software have been among the biggest contributors to Nintendo's earnings since the original player's introduction in 1989. In the six months ended Sept. 30, hand-held game machines and related software accounted for almost half, or 43.9 percent, of the company's sales.
The decline in Nintendo "factored in concerns that the GameCube may not be successful," said Zachary Liggett, an analyst at WestLB Securities Pacific Ltd.
"If GameCube continues strug-gling, [Nintendo] really needs to rely on the Game Boy Advance," he said.
Analysts say Nokia will take years to catch up to Nintendo.
Yet even though Nokia executives say the company's new N-Gage player, which doubles as a phone, doesn't tread on Nintendo's territory, similarities abound.
N-Gage is similar in design to the current version of the Game Boy Advance hand-held player. Nokia also tapped some of the same game-software developers, including Sega Corp, the company behind the "Sonic the Hedgehog" game character.
Adding to the software mix, Eidos Plc, Activision Inc and THQ Inc will develop games for Nokia's new machine.
To differentiate the new player, Nokia, which controls about a third of the mobile-phone market, included a built-in digital music player and a radio, a Web browser and the ability to send pictures, sound and e-mails to other users.
Whatever Nokia's success at hand-held games, Nintendo has shown that it understands the market. The company, known best for its Pokemon and Mario the Plumber game characters, sold more than 142 million Game Boys worldwide by the end of September.
Nintendo's nearest competitor, toymaker Bandai Co, has sold 3.25 million of its WonderSwan game players. Sony Corp and Microsoft, the world's largest and third-largest video-game machine makers, have steered clear of the hand-held market, sticking with home consoles instead.
"It's going to be very difficult to crack Nintendo's dominance of the hand-held market," said Takashi Oya, an analyst with Deutsche Securities Ltd. "Even Sony alone can't do it."
Nintendo isn't conceding. With no debt and almost US$6 billion in foreign-currency assets, the company has money to spend on marketing and developing new products. To prop up its share price, Nintendo spent Japanese Yen 70 billion since Oct. 1 to buy back almost 6 million shares.
The company will begin selling a revamped model of its hand-held machine, Game Boy Advance SP, in Japan on Feb. 14 and next month in the US.
The company plans to sell a third more Game Boy Advances in the fiscal year starting April 1, or about 20 million, Iwata told analysts in Tokyo this week.
Nokia declined to disclose how many N-Gages it expects to sell this year or next.
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