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Personally, I don't want nintendo to continue producing hardware. I think it's a sinking ship... but then again that's what many said about the PS3 (including me) and now it's my console of choice :p Maybe WII U could surprise me and be awesome, but judging from the leaked spec sheet and E3 presentation, I doubt it.
I want nintendo to continue making software, definitely, but I don't see where nintendo fits in the console market anymore, handheld wise. Apple and android phones seem to have the casuals covered, and the PSV looks like it'll get the hardcores.
So basically my answer to the question is I don't think they should or even can.
Where do you think Nintendo fits in OP?