NEW YORK (CNN/Money) - Nintendo, gearing up early for the holiday season, is dropping the price of its Nintendo DS handheld gaming system.

Effective Aug. 21, the DS will cost $129.99, a $20 discount from its current price. The price cuts come as gaming industry observers and retailers prepare for a showdown between Nintendo and Sony's (Research) recently released PSP (PlayStation Portable).

Launched nine months ago, the DS has been a strong seller for the company, with more than 5 million units sold worldwide. The clamshell device allows gamers to use a stylus and touchscreen to play games, rather than just the standard controllers found on most handheld systems.

For Game Boy fans, a new version of the flagship handheld gaming system is still on track for this year. Nintendo announced the Game Boy Micro will ship to stores Sept. 19. No pricing has been announced.

The news isn't all good at Nintendo, though, as the company has decided to delay its most anticipated game of the year. "Zelda: Twilight Princess" has been pushed back to a 2006 release, after the March 31 closing of Nintendo's fiscal year. The company is not committing to a launch date at this point.

Nintendo said the delay came at the request of the development team, which wanted to add new levels and more polish to the game.

"Zelda" is one of Nintendo's biggest franchises and "Twilight Princess" has been especially anticipated. The game won this year's E3 Critics Awards (one of the industry's highest honors) for best console game and best action/adventure game.

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