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Thursday, October 29, 2009, 06:20 am PT (09:20 am ET)

Nintendo profits freefall as iPhone cuts into portable game sales

Japanese game maker Nintendo's profits were cut in half, as sales of its portable Nintendo DS system continue to feel the impact of the iPhone and iPod touch.

Nintendo's profits fell from 133 billion yen a year prior to 64 billion yen , or $709 million, last quarter. Those losses, in part, were attributed to increased competition, including Apple's iPhone.

"Nintendo's portable game machine, the DS, also faces increasing competition from Apple Inc's iPhone, which has become a popular platform for handheld games," Reuters noted.

To combat declining interest in its Nintendo DS platform, the company announced it intends to launch a new form factor for the hardware in Japan in November. The Nintendo DSi LL will feature 93 percent larger 4.2-inch dual screens and will carry a $222 price tag.

As Apple continues to gain ground in the portable gaming space, the Wall Street Journal also suggested that the Cupertino, Calif., company could enter the console business and compete with the Nintendo Wii, Microsoft Xbox 360 and Sony Playstation 3. While that rumor has persisted for years, it has yet to prove accurate.

For years now, Apple has pitched its iPod touch as a portable gaming machine, dubbing it "The funnest iPod ever." The latest upgrade to the hardware includes the ability to run Open GL ES 2.0, with up to 50 percent faster performance.

When the upgraded iPod touch was unveiled in September, Apple highlighted a number of high-profile upcoming game releases from franchises that were established on competitors' hardware, including Assassin's Creed and Madden NFL. While many of the early successful iPhone and iPod touch games came from small-time developers, big-name content creators like Electronic Arts, id Software and Konami began flocking to the platform this year.

Apple also boasted in September that, at that moment, the iPhone OS had 21,179 game and entertainment titles available, compared to 3,680 for the Nintendo DS and 607 for the Sony PSP. One of the strengths of the iPhone and iPod touch is the number of budget-priced titles available for the platform. Comparatively, most games for the Nintendo DS and Sony PSP cost between $25 and $40.