Nintendo has been always pushing the industry to do something different. And Nintendo has been moving each generation to focusing more and more of its core business on its handhelds. I believe this is because where Nintendo lost ground in the home console fight, Nintendo only continued to gain ground in the portable market. To me everything points towards Nintendo moving towards another industry and company shake up for them.
Nintendo seemed to really start focusing on pushing the industry to do something different with the Wii and now with the Wii U. The N64 and Gamecube were really good traditional game systems. It's like Nintendo knew it was losing 3rd party support and wanted people to focus on features(experiences) for purchasing their game systems. They thought if enough consumers bought in 3rd parties would have to develop for their systems instead of trying to entice 3rd party developers with either partnerships or money changing hands.
Ian Sane - If they combined the two then they wouldn't have to worry about spreading their resources thin trying to supply games for two formats.
Software is hugely profitable for Nintendo. They could expand their teams to make more games if they wanted to. I don't think they want to flood the market with their games because it will drive down the value of their brand and the profitability of individual games they release as people would be more inclined to skip iterations of their games. For example, the Wii had 3 tradional Mario games and the DS had 2 Mario games. Would the market support 5 Mario games on one console? The Wii U will soon have 2 Mario's and the 3DS already has 2 Mario's.
I think the more reasonable expectation if Nintendo were forced to focus on one console would be that they would shrink development teams and possibly close some of their development studios. It will be much harder to squeeze the same profit from just one system without a systemized cost reduction or significantly increased demand.
And I think that is the key to this argument. Nintendo wouldn't want to focus on one system because it will mean less profit for them. It's possible that the market may eventually move this way, but the Wii, PS3, Xbox360 all are going to sell > 100 million units so there is still a strong market there. I think the home market could shrink as handheld entertainment becomes mainstream but I think people still want the TV to be the entertainment centerpiece of the home.
There are alot of good reasons why the home console/handheld markets would struggle and are iterated within this thread. But I'd like to add one other reason. They are almost two different markets in and of themselves. Home consoles focus on performance, 1080p and big screens. TVs will continue to get bigger and 4K screens will be appealing eventually. I don't see a handheld that costs <$400 having a hope of creating the experience I'm looking for on my big screen and this is complete overkill for mobile gaming where I want a 5" screen to look good.
I also think we are ignoring the effect that kids have in the market. I'm not happy if my kid breaks their $150 3ds but it's a risk I'm willing to take. I'm also willing to buy a 3ds per child because that is what is needed for a road trip experience. I'm not willing to buy multiple Wii Us for multiple children, and I'm not willing to risk my child taking a $350 Wii U to school and risk it breaking. So I think a $400 unit that can be a handheld fails. I think this would cause a collapse in the handheld market dominance where a $100-150 unit seems to flourish. I also think that people are willing to have a handheld as an add on because the cost is not seen as a dealbreaker(maybe even an impulse buy) and is much cheaper than other alternatives such as an ipad.