There is a significant reason I do not worry about Smart phones and such in the portable game market. Kids. Yes many adults and more teenagers now have cell phones. But at the same time, walk into a daycare of school age kids during quiet time, 90% of them, boys and girls, are playing on their DS. This market is going no where. Any kid above the age of 5 is perfectly capable of playing on a portable system, some even younger. Any kid under the age of 13, is not likely to have a cell phone. This age range is HUGE for the likes of Mario, Mario Kart, and Pokemon. I know of 5 parents where I work that are getting a 3DS for their kid where I work. I don't worry about Nintendo at all because of this.
Sony may have more trouble with it's Vita, because of the age bracket... but at the same time, the crowd they cater to is the hardcore player. The player that will want a dedicated gaming platform.
I don't see mobile phone games killing portables because of these two markets. Sure, a parent may let their kid play angry birds on their phone... but the kid won't have his own phone. What will he play at a friends house? At school on breaks? During quiet time in daycare? Nintendo is the answer most of the time. What about the older demographic that definitely has phones/smart phones? Well, I've played many a game on my smart phone, and some are quite fun. But nothing compares to the full experience of a game on the DS or PSP. The quality of these titles makes them worth the price to someone like me, and many other gamers in existence. Sure, I may not carry my DS with me at all times. Sure, I may pull out my cell phone when I have 5-10 minutes or something. But when I know I'm going to have a good chunk of time, 30 minutes or more, just sitting somewhere like a car ride, I'm bringing my DS/PSP. Some games are even worth sinking into while at home, with a home console sitting there. I may browse the internet on my phone at home, but I've never played a game on my phone while watching tv. I have played my DS/PSP while watching TV.