Sony Corp unveiled on Tuesday a smaller, lighter PlayStation handled game device called the PSP Go, in a race to catch rival Nintendo in an intensely competitive mobile games arena.

Hours before, Nintendo said it sold more than 15 million units of its blockbuster Wii Fit fitness game, and plans an update -- the Wii Fit Plus -- later this year.

Sales of the Wii have dwarfed those of more technically souped-up and pricier rival consoles from Microsoft Corp and Sony Corp, by broadening its audience beyond hard-core video gamers.

On the second day of E3, the largest U.S. video games conference, Sony and Nintendo vied for the spotlight, a day after rival console-maker Microsoft charmed audiences with its Natal: groundbreaking technology utilizing full-body motion-capture for gamers.

It was the first full day of the show, which is expected to draw some 40,000 game enthusiasts.

Many cheered and whooped at the press event at mere glimpses of new versions of popular games like God of War and Super Mario Bros., or at the mention of secretive ones like Agent, which is being developed for the PS3 by the creators of Grand Theft Auto.

Sony's PSP Go goes on sale October 1 in North America and Europe for about $249, before hitting stores in Japan November 1. It will be half the size of Sony's current PSP 3000 and 40 percent lighter, executives said.

The Japanese electronics company aims to sell 15 million units of the PSP or PlayStation Portable -- which competes with Nintendo's DS -- in the financial year to March, up from 14.1 million units a year earlier.

About the size of a smartphone, it features a large screen that slides up to reveal two clusters of controller buttons. It comes with Wi-Fi range wireless capability, and 16 gigabytes of memory for storing pictures, music and games.

Analysts say Sony is trying to staunch a loss of market share this year to its gaming arch-foe.

Nintendo's Wii has been a sensation since it was unveiled with much pomp.

The company's gaming consoles and hand-held devices have in past months outsold its rivals' products. Its DSi, released in the United States on April 5, sold roughly 800,000 units in the month, far outpacing Sony's PSP handheld.

The DS franchise overall sold more than 1 million units.

Nintendo's core Wii console was also the top-selling platform in April, even though sales fell by half to 340,000 units alongside a dive in consumer spending, according to research group NPD.

Kaz Harai, Chairman and Group Chief Executive Officer of Sony Computer Entertainment, described the PSP as more than just a gaming device, which could appeal to a broad consumer audience.

PSP Go represents a new evolution of PSP, specifically designed for the digital lifestyle, he said at Sony's E3 press conference.

E3 COMES ALIVE

E3 comes at a time when consumers are tightening their wallets amid a global economic slowdown.

Still, analysts and industry executives say video games have benefited from cocooning -- or the tendency to stay home and avoid expensive outings -- and the market remains resilient.

According to the NPD, U.S. video game-related sales shrank 17 percent in April to $1.03 billion, logging their second straight monthly decline. Game software sales fell 23 percent to $510.7 million that month, while that of hardware slid 8 percent to $391.6 million.

Reggie Fils-Aime, President of Nintendo of America, told Reuters on Tuesday the company's business had expanded 19 percent so far this year, while the rest of the industry declined about 4 percent.

He defined business as sales of Nintendo-related gaming hardware, software and accessories from the Japanese company and some of its third-party vendors.

The fact (is) that our business is up 19 percent this year, and all of our huge titles are yet to launch. We are feeling pretty good about this year, Fils-Aime said.

In 2008, Nintendo released some of its most popular titles for the Wii gaming console -- such as Super Smash Brothers Brawl and Wii Fit -- early in the year.

This year, Fils-Aime expects to score with Wii Sport Resort due in July and Wii Fit Plus and a new entry in the Mario Bros. franchise -- again for the Wii -- ahead of the holiday season.

Fils-Aime told Reuters Nintendo will not resort to a price war to try and move consoles or devices.

Price cuts are temporary measures. This industry has shown that compelling software is what drives the consumer, he added.

While the second day of E3 sparkled with product announcements, it paled by comparison to Monday's celebrity star power. Where the likes of rappers Eminem and Jay-Z and soccer great Pele' graced press events on Monday, neither Nintendo nor Sony raised the curtain on any surprise guests.

(Writing by Edwin Chan; Editing by Steve Orlofsky and Dhara Ranasinghe)

Japan Electronics Sony Nintendo