The maker of the GameCube home console and GameBoy Advance handheld player said weak demand for consoles was partly responsible for the 44.8 percent profit fall.

But the main reason was the high yen, which cost it 29 billion yen ($236.4 million) in losses on foreign currency assets.

Operating profit shrank 45.5 percent as its product lineup took in more low-margin lines and due to a price cut for its GameCube console in the United States and Japan in early summer, senior managing director Yoshihiro Mori told a news conference.

Weaker-than-expected sales of its new "Super Mario Sunshine" game also saw rival Konami Corp shove it aside to become Japan's number one game software maker in terms of domestic sales.

Group net profit for the six months to September was 18.97 billion yen ($154.6 million), down from 34.35 billion yen in the same period last year, while sales slid 7.8 percent to 208 billion yen.

The disappointing results and currency losses offset a special gain of 19 billion yen from its sale of a stake in game developer Rare Ltd, formerly one of its closest partners, to rival Microsoft Corp, the company said.

The downbeat performance was expected as the company trimmed its earning forecast last month, which prompted a share sell-off.

EAGER TO CATCH UP SONY

Nintendo, which is locked in a fierce three-way battle with leader Sony Corp and Microsoft in the home game console market, forecast a 24.8 percent fall in group net profit for the full year through next March.

Though sales are expected to rise 8.1 percent to 600 billion yen, an expected foreign-currency-related loss, instead of the profit last year, would hurt the bottom line, it said.

In the first half, Nintendo sold 2.88 million GameCubes worldwide, far below the 12.88 million PlayStation 2 consoles shipped by Sony.

Citing slack demand for its consoles in Japan and Germany, Nintendo has trimmed its original 2002/03 shipment target for GameCube by 17 percent and for GameBoy Advance by 21 percent.

It hopes to recover some lost ground in its mainstay home game console market by promoting new games in its "Pokemon" series, which hit store shelves on Thursday, and the "Zelda" series in December.

Mori said it has received orders for one million units each of "Pokemon Sapphire" and "Pokemon Ruby," both games for GameBoy Advance, from domestic retailers, suggesting a smooth start.

But Sony is not standing still. It said this week it would cut the wholesale price of PlayStation 2 by 3,000 yen in Japan, to ensure strong sales in the year-end holiday season.

Nintendo's Mori said it has no plan to slash the price of GameCube, but it will spend more than 30 billion yen in advertising globally in the second half to promote its products.

Hit by slumping consumer spending, Japan's game software market for April-September shrank 13 percent to 114.5 billion yen year-on-year, according to magazine publisher Enterbrain.

KONAMI POISED

Konami, known for its "Metal Gear Solid" games, is poised to unveil strong interim earnings later this month on robust sales of its hit soccer game and card games, following Namco Ltd which saw a 64 percent surge in operating profit thanks to strong sales for its "Tekken" action games.

In contrast, Sega Corp, creator of "Sonic the Hedgehog" character, posted a 20 percent fall in its operating profit due to poor U.S. sales for its American football game.

Investors' concern over growth prospects and the huge appraisal loss from the yen's strength have weighed on shares in Nintendo, sending them down by nearly 50 percent so far this year, worse than a 18 percent decline in the key Nikkei average.

The stock, which closed down 3.33 percent at 11,600 yen on Thursday before the announcement, hit a year low of 10,160 yen -- the lowest in three and half years -- in October.

In a move to shore up its sagging share price, the cash-rich company bought back 2.2 million of its own stock last month, the first such move since Nintendo's shareholders gave approval for it to buy back up to 14 million shares or nearly 10 percent of its total outstanding shares.

Nintendo, which has a cash or cash equivalent worth nearly 770 billion yen -- 67 percent of total assets -- declined to comment on its purchase plan, but some analysts see it likely to conduct more buybacks to support its share price.

"They've been doing share buy-backs, which tells you the company itself thinks the stock is undervalued," said Marc Desmidt, director of the Japanese equity team at Merrill Lynch Investment Managers, which oversees 350 billion yen of investment trusts.