There is a benefit of having the life of consoles over-lap to ensure that you’re getting steady profits to offset the costs of a platform release. If Nintendo’s handheld and console are both profitable when they replace one of them, and they both will continue to sell well and move software while the new system establishes itself, Nintendo will be able to remain profitable even when they’re absorbing the costs of the new system. What this means is that it is unlikely that Nintendo would wait for one of their platforms to begin to struggle before they replaced it; although, with the damage cutting a generation short does, they would probably let a console struggle until it became appropriate to replace it.
Now, this doesn’t mean that Nintendo would release a new system this year; but the primary question isn’t whether their systems are selling well, as much as it is whether there is value in replacing the platform. While this may sound silly given Nintendo’s recent obliviousness towards greater processing power, the hardware that is available today for a low cost handheld in itself offers Nintendo value. It is possible that Nintendo could release a platform which they could port Gamecube and/or Wii games to, and they could use to consolidate development resources across both platforms.
