Game giant Nintendo is feeling the effects of the iPhone, as their latest profit report indicates a 50% decline in profits as its portable Nintendo DS system sales fell quite steeply as it fields new competition from the iPhone and iPod Touch.

The sad statistics: Their 133 billion yen profit last year at this time was cut to 64 billion yen ($709M US Dollars). Strong competition from other platforms, including the iPhone, are mostly to blame. They even name the iPhone in their company press report as a major factor.

Nintendo will announce new form factors for the DS system, including larger screens and more to combat the iPhone, they also included in their recent communications.

It appears the iPod Touch/iPhone has entered the portable gaming sector with a vengeance, spurring rumors that they could eventually enter the gaming race formally as a competitor to Nintendo, Sony and other handheld gaming companies. That rumor has been floating around for years with little creedence however.

It might be something for Apple to think about, however.