Income shrank to a level not seen since before the launch of the Wii games console in 2006 as the company posted its lowest first-quarter operating profit in five years, although it is keeping to its profit forecast for the year.

The drop followed a global game market downturn as gamers made do with older equipment, and an unexpected fall in currency values in the US and Europe, which make up four-fifths of Nintendo's sales.

Nintendo has had to cut prices and sacrifice margins to prop up sales as it competes against Sony and Microsoft due to declining popularity for its ageing handheld DS, Wii machine and videogames.

It said its April-June operating profit slipped to £171m from £296m. The average estimate of two analysts polled by Thomson Reuters was £227m.

Helped by lower prices worldwide, Wii sales in the three months rose to three million compared with 2.2 million a year ago. DS sales, however slipped to 3.2 million from six million.

Analysts say the company may start selling its latest DS in Japan by the end of the year and overseas early in 2011.

When it does it will face competition not only from Sony and Microsoft, but also smartphones and social networking site games.

Nintendo aims to lure those gamers to an upgrade with the launch of a 3D-capable DS followed by a next-generation Wii, although it may be too late to bolster profit this business year.

Shares of Nintendo have fallen 21% over the past three months versus an 11% drop in the benchmark Nikkei average.

But the Kyoto-based company is keeping its forecast for operating profit to fall 10% to £234m in the year to March 2011. The market consensus was for £223m.