Oct. 2 (Bloomberg) -- Nintendo Co. added camera and music- playing functions to its best-selling DS handheld game player to widen its lead over Sony Corp.'s PlayStation Portable machines.

The Nintendo DSi will go on sale in Japan Nov. 1 for 18,900 yen ($179), President Satoru Iwata said at a briefing in Tokyo today. Overseas sales begin next year, he said.

The third version of the DS is aimed at protecting Kyoto, Japan-based Nintendo's dominance in portable gaming as Sony adds features to the PSP and Apple Inc. enters the market with iPods and iPhones that can play motion-sensing games. In August, Nintendo forecast it will sell 30.5 million handheld machines this fiscal year, twice as many as Sony's projected PSP sales.

``DS sales have been very strong, but I don't think the momentum will last much longer because the player has been available for almost four years,'' Iwata said. ``We wanted each family to have one DS, and now we want every member of a family to have one.''

Nintendo, also the maker of the Wii console, fell 3.7 percent to close at 39,500 yen on the Tokyo Stock Exchange. The stock, which more than doubled in each of the past two years, has lost 41 percent in 2008, while Sony shares dropped 51 percent.

``Nintendo's announcement on the DS didn't exceed investors' expectations,'' said Yoku Ihara, head of equity research at Retela Crea Securities Co. ``The stock market was so bearish that the news didn't help the shares gain.''

First Since 2006

The DSi is the first new version of the handheld player since Nintendo began selling the DS Lite, which retails for 16,800 yen, in March 2006.

Separately, Square Enix Co., a Japanese video-game publisher, said after markets closed yesterday that it will begin sales of the latest installment of its ``Dragon Quest'' series for DS players in March, after delaying the release from this year.

Sony plans to start selling an upgraded version of the PSP in mid-October that has a built-in microphone and a screen that displays sharper images.

Nintendo said in July it had sold 77.5 million DS players since the first model was introduced in December 2004. In August, the company raised its full-year profit forecast by 26 percent, citing higher-than-anticipated sales of DS and Wii players.

The Wii will probably widen its lead in the market for the latest generation of video-game consoles, outselling Sony's PlayStation 3 by two to one and Microsoft Corp.'s Xbox 360 by four to one this fiscal year, Daiwa Institute of Research Ltd. said in a report yesterday. The Wii outsold the PS3 and Xbox 360 by two to one last year, the brokerage said.

Nintendo will probably sell 26.5 million Wii consoles in the 12 months ending March 31, compared with 7 million Xbox 360 machines, according to Daiwa. Sony forecasts sales of 10 million PS3s this fiscal year.

To contact the reporter on this story: Hiroshi Suzuki in Tokyo at hsuzuki5@bloomberg.net; Junko Hayashi in Tokyo at juhayashi@bloomberg.net.

Last Updated: October 2, 2008 05:32 EDT