Japanese videogame producer Nintendo saw its shares fall sharply yesterday as investors reacted to the surprise news that the creator of Pokemon and the Mario Brothers will make its first loss.

Shares dropped more than 5% following the news late last week that the group's projected first-half profit of £85m will actually be a loss of £16m - the first in Nintendo's four decades as a publicly traded company - as a result of poor sales of its GameCube console and the dollar's fall against the yen.

The company, which keeps much of its foreign earnings in local currencies up to the last minute to take advantage of the better interest rates available outside Japan, has lost about £215m on foreign currency transactions since the start of the year as the yen has soared in value.

Analysts are also concerned about the Kyoto-based company's competitive position. Its second place in the video consoles market - behind Sony's PlayStation - is already under threat from Microsoft's XBox and its hand-held gaming devices unit is also threatened.

Sony plans to launch a portable version of the PlayStation towards the end of next year and this is likely to undermine Nintendo's GameBoy Advance.

Even before the new Sony product hits the stores, Nintendo will have to see off the marketing might of Nokia.

The Finnish mobile phone company yesterday said the launch of its N-Gage all-in-one mobile phone, music player, radio and gaming console will be one of its biggest to date.

The world's largest manufacturer of mobiles hopes to open up a new segment in the handset market with the N-Gage and is pumping millions of pounds into marketing the device.

It will be available in more than 30,000 stores across the world from its launch later this month and the company is hoping to sell several million next year.