Video games giant Nintendo has seen its annual profits slump by 66%, hurt by a strong yen and a drop in sales.

Net profit for the year to the end of March came in at 77.6bn yen ($945m; £570m), compared with 228.6bn yen the previous year, its results showed.

The company said that while it had not suffered any direct damage from last month's earthquake, it expected it to weigh on consumer spending in Japan.

Nintendo also announced that it will release a successor to the Wii in 2012.

Nintendo is banking on [the successor to the Wii] making migration from the Wii - and potentially its rivals - a no-brainer for consumers. Daniel Sloan, Author, Playing to Wiin Viewpoint: Can Nintendo go on winning?Nintendo announces Wii 2 console

Net sales fell 29% to 1.014 trillion yen.

Nintendo also faces a growing challenge from smartphones and tablets. In a bid to fight back, it launched the 3DS, a handheld console that provides a 3D experience for users without the need to wear special glasses.

The company said the device, which launched in February in Japan and in March in the US, Europe and Australia, had a "smooth start in sales", which totalled 3.61 million worldwide.

New model

In a separate statement, Nintendo said it had decided to launch a system to succeed the Wii next year.

It will give a demonstration of the new model at the E3 Expo in Los Angeles in June.

Nintendo has sold 86 million units of the Wii since its launch in 2006.

But sales of the console are falling - 15.1 million were sold in the year to March, down from 20.1 million the previous year.

And Nintendo expects sales of about 13 million in the next year.

By comparison, rival Microsoft has also seen a slight fall in sales of its Xbox - it sold 10.3 million in the year to March 2010, down from 11.2 million the previous year.

But Sony has seen a rise in sales of its Playstation 3. It sold 13 million units in the year to March 2010, up from 10.1 million the year before.