Feb. 23 (Bloomberg) -- Namco Bandai Holdings Inc., Japan's second-biggest maker of toys and video-game software, cut its profit forecast by 55 percent after failing to develop enough game titles for handheld players from Sony Corp. and Nintendo Co.

Net income will probably be 11 billion yen ($94 million) in the year ending March 31, the company said in a statement today, compared with the previous forecast for 24.4 billion yen. Sales will probably be 450 billion yen, compared with a previous estimate of 470 billion yen. No year-ago figures were available.

``Our software development efforts couldn't keep up with the changing market,'' President Takeo Takasu said today at a news conference in Tokyo. The company didn't anticipate the demand for games for Sony's PlayStation Portable and Nintendo's DS handheld players, he said.

Namco Bandai, formed in September when Bandai Co. bought Namco Ltd., expects to reduce game software development costs and create hit products using its ``Gundam'' and ``Pac-man'' characters. It announced its three-year business targets at a press briefing in Tokyo today.

The company expects operating profit of 40 billion yen in the next fiscal year, compared with its previous forecast for 50 billion yen. Operating profit will probably climb to 50 billion yen in the year ending March 2008, compared with its previous estimate of 55 billion yen.

The company today said it would take a one-time loss of 6 billion yen to cover a decline in the value of game software inventory in the year ending March 31.

Banpresto

Separately, the company said it would offer to buy the shares it doesn't already own in Banpresto, a maker of amusement prize machines and software. Namco Bandai, which holds 51 percent of the unit, said it would spend 18.3 billion yen to buy the remaining stake in Banpresto at 3,450 yen a share, 26 percent more than their closing price today in Tokyo.

Net income may gain to 32.5 billion yen in the year to March 2009, on 550 billion yen in sales, the company said. Operating profit, or sales minus the cost of goods sold and administrative expenses, will gain to 58 billion yen in the period, compared with 32.5 billion forecast this year.

Namco Bandai reiterated its annual dividend target of 24 yen a share with a payout ratio of 30 percent, the statement said.

Namco Bandai shares rose 2.2 percent to 1,650 yen at the 3 p.m. close on the Tokyo Stock Exchange. The announcement was made after the market shut.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net.

Last Updated: February 23, 2006 05:12 EST