GameCube sales have lagged behind Sony's PS2

Consumers, however, got a price cut. Nintendo said it will slash the price of its games consoles in Europe and Japan in order to boost Christmas sales.

Nintendo has already cut the price of its GameCube home-use console in the US, taking it just below the psychological barrier of $100 to boost flagging sales.

The firm said it now expects to report a loss of 3bn yen ($27m; �16.2m) for the six months to end-September 2003.

Shock

It will be Nintendo's first ever loss for the April to September period. Equally shocking to investors was that, as recently as May, Nintendo predicted profits of 15bn yen.

But late on Friday, the firm said sales would miss its earlier target by 9%, coming in at 210bn yen.

Nintendo, which faces stiff competition from Sony's PlayStation 2 and Microsoft's Xbox, halted production of the GameCube earlier this year because of a backlog of unsold stock.

Its decision to cut the price of the GameCube in Europe to a lower one than in the UK won a rebuke from the UK Consumers Association.

"It seems unfair that the UK always ends up paying more," a Consumers Association spokeswoman said.

The GameCube will retail in the UK for about �79 ($131), roughly �10 more than in Continental Europe.

No big problem?

IT sector analysts were divided as to the significance of Nintendo's profits warning.

The firm said the problem was largely a technical one caused by falls in the value of assets held in US dollars.

"GameCube is getting beaten by PS2 and XBox," said analyst Takashi Okatani at Shinko Investment Trust Management Co. "GameCube sales have been slowing since last year. The forex issue is an additional blow."

But Goldman Sachs' analysts in Tokyo took a more positive view, saying "the foreign-exchange loss is non-operational and does not affect our valuation of the company".