February 9^th, 2004 (12:00am) - [UPDATE] Japanese reports say the game giant has bowed out of the next-gen console race. However, Nintendo of America officials say such reports are "speculation."

This morning shockwaves went through the game industry after an article in the Nihon Keizai Shimbun quoted Nintendo officials as saying they had put plans to release a next-generation console on hold. The article quoted Nintendo president Satoru Iwata as deeming Nintendo’s current GameCube has not yet reached its full potential. "Customers are fully satisfied with the performance of the current model," said Iwata.

According to the Nihon Keizai Shimbun, Nintendo management had decided to forgo development on the GameCube’s successor in order to focus on peripherals that will enhance gameplay, including further interactivity with the Game Boy Advance and (presumably) the upcoming Nintendo DS. The article says that Nintendo would release the first of these peripherals in 2005, when Microsoft is expected to release its next Xbox. The next Sony console is not expected out until 2006.

The article said Nintendo would still continue development of "a new home-use game machine for release in the future," but the earliest that machine would be released would be 2007.

However, according to Beth Llewellyn, Nintendo of America’s director of corporate communications, the Nihon Keizai Shimbun article is erroneous, and based on "a lot of speculation." She also said the Iwata quote was from another article and was taken out of context.

Regarding the status of Nintendo’s next console, Llewellyn told GameSpot "we will launch at the same time as our competitors. Our status hasn’t changed." However, Llewellyn did shed some light on its functionality. "While our competitors are focusing on being everything in the living room, we’re focusing strictly on gameplay," she said, indication Nintendo’s next console would not aspire to be a home entertainment center like Sony’s PSX. Llewellyn did say that Nintendo may be readying a new crop of peripherals for the GameCube. "We’re always looking at accessories that enhance the GameCube."

If Nintendo does put its next-gen plans on hold, analysts say such a strategy shift would not the desperate move some console-war partisans have (already) made it out to be. "Concentrating on the Game Boy Advance and new handheld systems to defend against serious competition from the Sony PSP is a sound strategy," said the Zelos Group’s Billy Pidgeon.

However, Pidgeon also admitted the gambit was not without risk. "It will be difficult to sustain third party participation as the GameCube ages and newer home consoles are released," he said. Pidgeon also pegged the main beneficiary if Nintendo were to beat a temporary retreat. "Nintendo’s decision to effectively abstain from the next generation of home consoles is better for Microsoft than Sony, as Nintendo’s regrouping will help defend Nintendo handhelds against the PSP."