Wedbush Morgan Securities analyst Michael Pachter believes the handheld market has reached saturation point, with Sony's PSP2 set to be "dead on arrival", while Nintendo's 3DS will only delay an inevitable losing of ground to Apple's iPod Touch.
Speaking on the latest episode of his Gametrailers show, Pach Attack
, the analyst said: "[While] we're not even close to saturation on the video game consoles, we're way approaching saturation on the handheld market."
"We're starting to see DS hardware sales crack," he continued. "I think the ubiquity of the iPod Touch is cutting into the handheld market, I think the PSP was dead on arrival and I think the PSP2 is going to be dead on arrival."
Pachter argued that Apple's iPod Touch device is undermining the video game hardware manufacturers through convergence and dramatically cheaper software.
"It looks to me like young kids are just as happy playing with an iPod Touch or a Nano. The Touch is cool, it plays games, plays music, they're going to put a camera in it and you're going to get all kinds of cool stuff."
"What's the difference if you play Tetris
on an iPod Touch or on a DS?," he asked. "Well, you pay a buck on the iPod Touch, you pay $20 on the DS. Parents prefer $1 or free software."
"I think the iPod Touch is going to sell really, really well," he added. "I really think as the iPod Touch gets more and more powerful, you're going to see a lot of free games over there."
Pachter went on the claim that Nintendo's forthcoming 3DS will buoy the handheld market, but that its successes will likely only be temporary. "The 3DS will prolong the handheld market for the game manufacturers, but ultimately, I think handhelds are in trouble. After the 3DS has had its little rush I think the handhelds will continue to decline."