Sony Computer Entertainment (SEC) has surprised industry watchers by announcing it will launch a portable game console at the end of 2004.

SEC, maker of the popular PlayStation game console series, said its new handheld console would be called PSP and extend PlayStation's reach.

But the news wiped almost 10% off shares in rival Nintendo, until now the clear leader in the handheld game market.

Sony shares rose 5% on the news, as analysts suggested the group had made a strong move.

"While Nintendo still holds the competitive edge in the market for portable games, it is safe to assume that this move by Sony will eat into Nintendo's profits down the road," said Makoto Suzuki, a senior fund manager at Chuo Mitsui Asset Management.

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