Let the gaming war begin…

Sony (NYSE: SNE), Microsoft (Nasdaq: MSFT) and Nintendo (OTC: NTDOY) have selected their big guns in the latest fight for domination of the lucrative video game consoles world.

This one involves development of the best motion controller.

• Nintendo: The firm currently has the lead, with an accelerometer built into its handheld device, although that could change in 2010 when the other two debut their own versions. And it's also alluded to an improved Wii by 2011.
• Sony: The firm's new model uses a camera to track a device in the player's hand.
• Microsoft: Mr. Softie's already highly acclaimed "Natal" features an infrared camera, which measures a gamer's motion in three dimensions.

If you invest in the technology sector, you may already know about the battle going on between these three opponents.

But what you might not know, though, is that there's a simultaneous rivalry happening in the handheld games consoles arena – a competition that could lead to bonus points and a boost to your portfolio.

Imitation Is The Sincerest Form Of Flattery… Or Just A Sure Sign Of Desperation

Make room for the new gamer in town.

Apple (Nasdaq: AAPL) poses a very real threat to this ultra-already competitive sector.

Game console makers face increasing pressure from the rise of mobile phones that have processors and graphics to rival any PlayStationPortable (PSP). Add "app stores" of downloadable games for every major mobile operating system to the table, and consumers have even more reason to scroll over to the Apple way of doing things.

In fact, Nintendo warned in July that it faced its first profit decline in four years, due in part to competition from Apple's handheld gadgets.

And since Apple has taken Sony off guard before in the market for e-book readers, the Japanese firm recognizes the threat, too – and isn't taking this latest encroachment lightly.

The company recently launched a new version of its PSP – the PSPgo – which looks eerily similar to the iPhone or iPod Touch. The big difference is that it features a slide-out controller, rather than a touch screen.

Coincidence? We think not. Especially considering how it stores games on 16 gigabytes worth of internal memory, rather than on disks like in the old days… just like one of Apple's portable devices. And it weighs 43% lighter than the existing PSP.

And just like Apple's App Store, Sony plans to feature a "Minis" section in its online PlayStation Store, where consumers can purchase and download games.

The only problem? It costs $250, compared to $199 for Apple's 8-gigabyte iPod Touch.

Apple Takes a Bite of the Handheld Games Marketplace

In a September 2009 presentation of new iPods, Apple bragged about how its App Store contained 21,000 games, compared to the Nintendo DS's 3,700 and 600 for Sony's PSP. And that range makes it very appealing for mobile game publishers.

According to Edward Woo, a video game analyst with Wedbush Morgan Securities, "The iPhone is where all the growth is."

That mentality explains why Apple has sold over 50 million iPhones and iPod Touches… dangerously close to Sony's 56 million PSPs, although still a far cry from Nintendo DS's 108 million.

And keep in mind that the PSP launched almost five years ago, whereas the iPhone debuted in 2007.

Kaz Hirai, head of Sony Computer Entertainment tried to hold his own by pointing out that consumers prefer "games where intricate motion controls are required… (with) physical buttons."

Maybe. But Apple still has the edge with games that cost less than $10 each, as opposed to $25 and even $40 from its competitors.

And since that kind of price difference makes a very big difference, Apple holds the advantage for the time being.

Good investing,

Tony Daltorio