Nintendo unleashes Game Boy upgrade

Nintendo expects to sell 24 million Game Boy Advance units by 2002

In this story: 23 million units by 2002 New upgrade, new features More software titles Battle with Microsoft, Sony RELATED STORIES, SITES

By Kristie Lu Stout
CNN.com Writer

TOKYO, Japan (CNN) -- Nintendo launched the successor to its best-selling Game Boy today, feeding gamers' appetites for the next generation handheld player.

The new Game Boy Advance is faster than its predecessor, with higher resolution and Net access, and analysts expect it to secure Nintendo's dominance in the handheld sector with sales of up to 80 million units by 2006.

With its update of the decade-old device, Nintendo continues to target a younger audience -- a niche market that is largely overlooked by Microsoft's Xbox and Sony's PlayStation 2.

23 million units by 2002

Total sales of the 11 year-old original Game Boy topped 100 million units, and Nintendo expects sales of 24 million Game Boy upgrades by 2002 -- a target that analysts say is definitely within reach.

"I think if they can ship them, they can sell them," Lisa Spicer, senior analyst at ING Barings in Tokyo, told CNN.com.

"And everything points to a fairly smooth ramp of production."

Spicer projects that Nintendo will sell 23 million units of the Game Boy Advance by March 2002, with another 24 million by March 2003.

QUOTE "The hardware has more features, and Internet capability which will enable Nintendo to sell more units to more people." - Takiko Mori, UBS Warburg

UBS Warburg gaming analyst Takiko Mori anticipates sales of 80 million units by 2006.

"The hardware has more features, and Internet capability which will enable Nintendo to sell more units to more people," says Mori.

New upgrade, new features

"We finally have a nice update," Zachary Liggett, games software analyst at West LB Securities, told CNN.com

"I've sampled some of the games. They look sharp on even a larger screen and the processing is very smooth. I was very impressed."

The Game Boy Advance is equipped with a 32-bit central processing unit and a large screen.

It also enables four people to play the same game at once, while allowing data to be exchanged using a cellular phone adapter.

Nintendo has joined forces with camera maker Olympus Optical to develop a card-swipe system enabling players to download their favorite characters to do battle on the pocket-sized machine.

With help from Olympus, Nintendo aims to launch the "card-e" system worldwide later this year, aiming to win over younger players with the promise of a wide variety of characters that can be downloaded using special cards.

The paper cards will carry sounds and visual data from a range of characters, including those from the phenomenally popular Pokemon series.

The Game Boy has been selling well, with shipments expected to hit a record 23 million units this fiscal year, riding on the popularity of the Pokemon series.

The new machine will carry a $79.58 price tag in Japan and will retail at $99.95 in the United States.

More software titles

The game maker plans to release 25 software titles when it launches the Game Boy upgrade, up from the previously planned 10 in a move to spur sales, according to the Nihon Keizai Shimbun business daily.

Analysts regard Nintendo's in-house software development as a major competitive advantage.

"What is strong about Nintendo is that they not only do hardware but they also support an internal development team to develop the best software for portable games," says UBS Warburg's Mori.

Third parties will also develop gaming titles for the device, with 21 of the titles from 12 major game software manufacturers including Sega, Konami and Namco.

Battle with Microsoft, Sony

Although Nintendo has no serious competition in the handheld gaming sector, it is gearing up for a titanic struggle against Microsoft and Sony in the home console market.

The year will see the release of Microsoft's Xbox as well as Nintendo's own GameCube. Sony currently dominates the market with its PlayStation2 advanced game machine.

Despite the competition, Nintendo will continue to tough it out in the home console market.

"They will continue to fight with the Game Cube coming out this summer. They've made a large investment remaining in the console game," says Liggett.

Analysts say with its focus on a younger audience, Nintendo is insulated from the front line of the home gaming machine war.

"Sony and Microsoft are going after the late teen to early adult demographic. Nintendo is on the younger side."

Although the handheld and home console gaming sectors have been running in tandem markets, the Game Boy Advance may cross that line of demarcation and grab market share from the Xbox and PlayStation.

"It's possible it will take a little bit of the demand from the home console market," says Spicer.

Analysts say the cost of developing a PlayStation 2 game is about $2 million, far more than the $325,000 for a Game Boy Advance game.

"My guess is that (the Advance) will be profitable soon in terms of the hardware. With the software, that should be profitable right off the bat," says Liggett.

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