The only way you can defeat any company that holds the majority share in a market where you cannot brute-force buy success is with disruption or Blue Ocean Strategy. Handhelds are very much a market where brute-force does not work: a handheld with top-of-the-line hardware on it would have horrible battery life, massive size, and be entirely too fragile to use as a portable.
The marketing method doesn't work so great either, because if the product you've made falls short as a handheld in any key department, the flaws stick out far more sharply than they do on a home system. This is what kept the Game Gear from having significant market impact: the screen was so blurry and the battery life so short that the market rejected the product in favor of the older but more reliable Game Boy.
The only ways left, therefore, are disruption and Blue Ocean Strategy. If you change the market in a way that puts the existing methods of the market into a state of clear value inferiority, then you can claim the market from any incumbent. If you add new values entirely to the market that hold more worth to users than the existing values, then you can also claim the market from any incumbent. So far, no company has shown much inclination towards either, save Nintendo of course.
The real problem is that disruption and Blue Ocean Strategy are customer-oriented, while the vast majority of businesses are product-oriented. Instead of finding out what customers would find to be a valuable change in the way the product works, most companies listen to what their existing customers say and just improve the existing product to better suit said customers. But making a product better for existing users rarely draws in new users unless there was a key flaw in the product originally that existing and non-customers alike would like to see fixed.
In short, anything is possible, but most things aren't likely. Unless another company emerges with authentic creativity and even more customer-oriented policy than Nintendo, we won't see a non-Nintendo handheld dominate.
Sky Render - Sanity is for the weak.
