Nintendo Co Ltd's shares plunged on Friday, wiping off as much as $5 billion of the videogame maker's market value, after it slashed its full-year profit forecast to the lowest level in 27 years.

Profits are set to shrivel after Nintendo was forced to cut the price of its 3DS handheld games device to try to jumpstart weak sales, just six months after launching the gadget that it hoped would replicate the success of the previous generation DS.

Shares of the Kyoto-based firm hit 11,100 yen, its lowest intraday level since May 2004 before recovering to trade down about 15 percent in early afternoon.

Nintendo slashed its annual operating profit forecast in after-market hours on Thursday to 35 billion yen from an initial forecast of 175 billion yen. The new estimate is far short of the previous consensus of 154.9 billion yen based on 24 analysts' forecasts ahead of the results.

They are standing on the edge, said Yuuki Sakurai, CEO and president of Fukoku Capital Management in Tokyo. When I ride on the trains I see people using their smartphones to play games and people don't want to overlap their spending on other devices, he said.

Nintendo must consider providing games to these new platforms rather than focusing on new hardware, Sakurai added.

Nintendo also cut sales forecasts for its Wii home games console and the previous generation DS handheld device.

The Wii is facing harsh competition from rival Microsoft's Xbox, while many casual gamers are turning to devices like Apple's iPhone and iPad, rather than dedicated games gadgets.

JP Morgan cut its rating on the firm behind the Super Mario franchise to underweight from overweight, saying the current situation was worse than feared and the outlook uncertain.

The timing of the 3DS hardware price cut is surprising, given the major in-house software releases... We believe the 3DS will be a heavy weight on earnings over the medium term. The lack of a share buyback announcement is also disappointing, analyst Hiroshi Kamide said in a report.

STIFF COMPETITION

Shares of Sony Corp also fell on Friday, a day after the Japanese consumer electronics firm slashed its outlook for TV sales and cut its full-year net profit forecast to 60 billion yen from 80 billion yen.

Brokerage CLSA cut its rating of Sony to underperform from outperform and lowered its target share price to 2,150 yen from 2,430 yen, saying the downgrade reflected the stronger headwinds from LCD panel and TV overcapacity as well as the strengthening yen.

Sony, the maker of Bravia TVs, slashed its annual forecast for LCD TVs to 22 million from 27 million and warned that annual losses in the division might widen from the previous year.

By midmorning Sony shares were down 2 percent at 1,973 yen, while the benchmark Nikkei was down 0.1 percent ($1 = 77.800 Japanese Yen)

(Reporting by Isabel Reynolds, James Topham, Ayai Tomisawa, Mariko Katsumura and Tim Kelly; Editing by Muralikumar Anantharaman and Anshuman Daga)

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