Sony slashed its Vita sales expectations for the year, lowering its estimate from 16 million to 12 million units for the fiscal year ending March 31, 2013. The cut in the forecast reflects slow demand for the new Sony handheld, despite a huge marketing campaign.

The slow sales are a reflection of a fiercely competitive mobile gaming landscape, as the Vita competes not only against the Nintendo 3DS but also the Apple iPhone, iPod Touch, and iPad as well as tons of other smartphones and tablets. Apple’s iPads alone sold more than 17 million units in the June quarter. The PS Vita, which has a beautiful touchscreen and standard game controls, has been on the market since December.

Sony’s game division reported a loss of $45 million (3.5 billion yen) in the first fiscal quarter ended June 30. The consumer electronics giant blamed the loss on slower sales of the PlayStation Portable and PlayStation 3 game systems as well as unfavorable foreign exchange rates.

The PlayStation Vita’s sales helped with the year-over-year comparison, but they were not enough to offset the loss. The Vita (pictured) is selling at a pretty slow rate for a portable game system. During the quarter, Sony said it sold 1.4 million units of the Vita and 2.8 million PlayStation 3s (and PS 2s). A year earlier, Sony sold 1.8 million PSPs and 3.2 million PS 3s and PS 2s. The PS 3 is on the tail end of its life cycle, and a PlayStation 4 is expected in 2013.

Sony said its sales were $1.5 billion (118 billion yen) for the first fiscal quarter, down 14. percent from $1.75 billion (137 billion yen) a year earlier. The $45 million operating loss compared to a profit a year ago of $52 million (4.1 billion yen).

For the fiscal year, Sony is predicting sales of $10.26 billion (805 billion yen). For the previous fiscal year, sales were $8.66 billion (679.9 billion yen). Operating income is expected to be $370 million (29.3 billion yen). Sony sold 20.1 million console games and 5.8 million Vita games in the first fiscal quarter. It expects to sell 164.5 million console games in the year and 32.2 million portable games.

Submit your PC game by December 14th for free testing and be entered to win an @intel​ CORE i9 PROCESSOR worth $1000, an iBUYPOWER​ Revolt 2 Pro Z370 worth $1750, or an ASRock​ X299. ENTER & WIN: Submit your PC game to the Intel Game Dev Program