Shares of Nintendo Co. took a beating Friday, losing more than a fifth of their value at one point, after the Japanese video game giant announced a worldwide price cut for its new 3DS in an effort to salvage poor sales.
The move spooked investors and analysts, who had expected a quarterly loss but were taken aback by the severity of Nintendo's woes.
The stock fell more than 20 percent in the morning but pared losses in the afternoon. It closed down 12.2 percent at 12,290 yen.
Nintendo on Thursday posted a net loss of 25.5 billion yen ($324 million) in the April-June period, almost on par with its loss a year earlier. Sales during the quarter slumped more than 50 percent.
The numbers forced Nintendo to slash its profit forecast for the full fiscal year through March by more than 80 percent.
The Kyoto-based company blamed its lackluster performance on a dearth of hit titles for the Wii and 3DS handheld device, as well as a strong yen. Analysts say Nintendo's problems run deeper.
The 3DS got off to a solid start when it launched in February to high hopes. But it has fizzled since then. The company moved just 710,000 units in the latest quarter, compared with 3.61 million in its debut quarter. Sales of the regular DS and Wii also fell sharply.
To fuel momentum, Nintendo decided it needed to cut prices just five months after it launched the 3-D version of its popular DS.
The device will cost 15,000 yen in Japan starting Aug. 11, down from 25,000 yen. In the U.S., the price drops to $169.99 from $249.99 on Aug. 12.
JPMorgan immediately downgraded its rating on Nintendo shares to "Underweight."
"The launch of the new 3DS has stalled and the hardware price cut so early into release is an unprecedented act, highlighting that management's confidence in their contents is not enough to push through into Christmas 2011," said JPMorgan analyst Hiroshi Kamide in his report.
It took almost three years for the company to lower the price on the best-selling Wii for the first time, and that was by $50.
Nintendo's recent missteps underscore the Kyoto-based company's struggles in adapting to a gaming market that has evolved since the Wii revolutionized the gaming industry when it launched five years ago.
The Wii, with its motion-sensing controls, expanded gaming to casual users and even non-gamers like seniors. The console flew off shelves, and Nintendo's biggest problem at the time was keeping up with demand.
Now it must contend with the rise of smartphones and social networks, which have lured millions of casual gamers around the world and spawned smash hits such as Rovio Mobile's "Angry Birds."
So far, Nintendo doesn't seem to have a good answer.
Nomura Securities also cut its rating on Nintendo's stock one notch to "Neutral." Analyst Yuta Sakurai asks, "Has Nintendo lost its way?"
He commends the price cut as a bold decision that is likely to boost sales. But it will hit earnings hard. And even if Nintendo's next major launch _ the Wii U _ goes smoothly, the company's profits are unlikely to reach anywhere near the levels during the Wii's peak, he said.
"We think Nintendo will have to radically change its tactics if it is to once again increase the size of the gaming population," Sakurai's report said.
Follow Tomoko A. Hosaka at http://twitter.com/tomokohosaka