Nintendo posts Q1 profit fall, keeps outlook

TOKYO, July 29 (Reuters) - Japan's Nintendo Co Ltd (7974.OS) posted a 42 percent drop in quarterly operating profit and kept its full-year forecast, hit by slowing demand for its handheld game device and a stronger yen.

The world's leading video game machine maker said its operating profit fell to 23.3 billion yen ($266 million) in April-June from 40.4 billion. The average estimate of two analysts polled by Thomson Reuters was 31 billion yen.

Nintendo kept its forecast for operating profit to fall 10 percent to 320 billion yen in the year to March 2011. The market consensus was for 305 billion yen.

Nintendo is vying for business with Sony Corp (6758.T) and Microsoft Corp (MSFT.O) amid a squeeze in demand worldwide for vidoegames and consoles. Analysts expect Nintendo's profitability to erode until it launches a new Wii console and a 3D version of its popular DS handheld game player.

Shares of Nintendo have fallen 21 percent over the past three months versus a 11 percent drop in the benchmark Nikkei average .N225. (Reporting by Tim Kelly; Editing by Anshuman Daga)