Japanese game maker Nintendo Co. Ltd. on Thursday posted a 40 percent rise in quarterly profit, driven by blistering sales of its DS handheld machine, and stood by its forecast for record-setting annual earnings.

The creator of such game characters as Mario and Donkey Kong said it is on track to hit its target to sell 6 million units of new game console, the Wii, by March.

Nintendo's strategy to broaden the game population beyond young males to women and the elderly was a huge success as the DS, characterized by its ease of use and innovative game software such as "Brain Age" and "Nintendogs," saw strong demand globally.

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The strong results were expected as Nintendo, which competes with Sony Corp. (SNE) and Microsoft Corp. (MSFT) in the $30 billion video game industry, earlier this month raised its outlook for the year to March for the third time.

The Kyoto-based company kept unchanged its latest net profit forecast of 120 billion yen ($990.5 million) for the year to March, up from a profit of 98.38 billion yen a year earlier.

The outlook compares with the consensus of a 126.6 billion yen profit in a poll of 12 analysts by Reuters Estimates.

It also maintained its annual operating profit forecast of 185 billion yen, which would be more than double its 90.35 billion yen profit a year ago.

"Numbers were really strong, but there was little surprise after the upward revision the other day," Daiwa Institute of Research analyst Eiji Maeda said.

"Going forward, its share price will be susceptible to new software titles for the Wii and foreign exchange fluctuations, both of which could affect full-year results," he said.

SECOND GROWTH ENGINE

The DS, which opens like a book and lets users control the game by simply touching the screen with a stylus, is expected to get a further boost this year as game software maker Square Enix Co. Ltd. launches the latest version of its popular "Dragon Quest" games for the Nintendo machine.

Net profit in October-December rose 39.6 percent year-on-year to 77.57 billion yen, according to Reuters' calculations. Nintendo only announced results for April-December — the first nine months of its business year.

Operating profit in the three-month period came to 100.52 billion yen, up 59.1 percent on the year, while sales grew 75.3 percent to 413.77 billion yen.

Aiming to repeat the success of the DS in the console market, Nintendo in November launched the Wii, in a three-way showdown with Microsoft's Xbox 360 and Sony's PlayStation 3.

Its motion-sensitive controller allows users to direct on-screen play by swinging the device like a tennis racket or wielding it like a sword, opening up a new avenue of game playing.

Any success of the Wii means Nintendo would get a second growth engine on top of the hot-selling DS.

Nintendo sold 3.19 million units of the Wii, which sells 25,000 yen in Japan and about $250 in the United States, by the end of December.

"Demand has remained solid in January and production is picking up. We are likely to be able to sell 6 million units by the end of March," Nintendo senior managing director Yoshihiro Mori told reporters.

Prior to the announcement, shares of Nintendo closed up 1.2 percent at 33,550 yen, while the benchmark Nikkei average fell 0.28 percent.

The stock has gained 27 percent in the October-December period, far outperforming the Nikkei's 7 percent advance.