If you look at the historical performance of Nintendo they seem to do best when they are competing with asymmetric values or are targeting a new/emerging market; and the more established the market is, and the more similar they are to their competition, the worse Nintendo has performed.
To a certain extent, Nintendo will be forced to compete against Sony and Microsoft in a more symmetric market being that I expect Sony and Microsoft will make moves "Towards the Wii" to capture the new gamers the Wii attracted this generation; and Nintendo will make moves "Towards the HD consoles" to make the Wii more attractive to conventional gamers and third party publishers. Unlike the PS2/XBox/Gamecube generation I wouldn’t expect all three companies to produce slight variations of the same system and I do expect to see each company try to differentiate itself from the competition in more than marketing or processing power.
Overall, I see the next generation as being a good opportunity for Nintendo to recapture and build upon their success; and how well they perform really depends on whether they can broaden the appeal of the Wii to encourage adoption by their current install base, new gamers and established core gamers.
