* Q1 operating loss 10.3 bln yen vs 20.6 bln forecast of analysts
* Sticks with forecast for operating profit rebound to 35 bln yen
* Maintains full-year outlook for 3DS consoles sales of 18.5 mln
TOKYO, July 25 (Reuters) - Nintendo Co Ltd, the world's No.1 games console maker, reported a first-quarter loss that was half of what analysts had expected due to cost-cutting and new software titles.
The creator of the Super Mario franchise stuck with a forecast for full-year operating profit to rebound to 35 billion yen ($447 million) expecting sales of titles such as the latest version of Dragon Quest from Square Enix to underpin income for the remainder of the business year ending March 31.
That forecast compares with a consensus forecast of a 32 billion yen profit from 21 analysts surveyed by Thomson Reuters I/B/E/S.
Nintendo, however, will struggle to repeat the stellar profit growth it once earned from its Wii and DS consoles. It faces growing competition from Apple Inc and other makers of mobile phones and tablet PCs, forcing it and its traditional rivals Microsoft Corp and Sony Corp to look for ways to retain gamers.
That shift in gaming habits may, say analysts, eventually force the Japanese company to chase profits for Super Mario and other game titles on devices built by other firms rather than its own consoles.
Nintendo posted an operating loss of 10.3 billion yen for the most recent quarter compared with a loss of 37.7 billion yen a year earlier. That was half the average loss forecast of 20.6 billion yen from three analysts.
In the quarter just ended, sales of its Wii game machines more than halved to 710,000 from 1.56 million a year earlier. The company sold 540,000 DS handheld consoles compared with 1.44 million in the same period year earlier.
Sales of its 3DS, launched in February last year, more than doubled to 1.86 million from 710,000. Weak demand for its latest console forced Nintendo to slash its price by a third in August.
Nintendo maintained its sales outlook for Wii game machines of 10.5 million for the year with DS handheld consoles at 2.5 million. It also stuck to its sales forecast for its 3DS handheld game consoles, saying it expects to sell 18.5 million by March 31.
Nintendo is expected to release its successor to the six-year old Wii, the Wii U, later this year. The first console in 16 years with a dedicated Super Mario game title it features a "Gamepad" controller that functions like a tablet.
It also comes with a social gaming network dubbed "Miiverse", a bid to catch-up with the online strategy of rivals such as Sony.
Since the start of the business year, Nintendo's shares have dipped by a third and almost halved in value in the past year. Its shares on Wednesday dipped 1.6 percent to close at 8,150 yen before the release of its earnings.