Nintendo shouldn't be worrying about it, they have stated all along that they aren't competing with the HD consoles... 
I agree about halfway though, the Wii is mostly a machine that was neglected and missed great opportunities, a lot of it was through Nintendo's own fault for not showing initiative for better implementation of proper motion controls and for choosing aged architecture that made cross-platform development either a pain or pretty much impossible. One of the biggest disappointments in gaming is probably a bit too harsh for me though, we have to remember that the expectations were very low indeed across the board so the fall wasn't very high at all. In fact; one could argue the opposite, at least purely from a commercial standpoint, seeing as how it outperformed both the other two and crushed the misgivings and low initial predictions and forecasts to smitherines.
For me though, the entire 7th generation has been an incredible disappointment on almost all fronts and the PS3 and 360 have done little to nothing to keep that feeling at bay.







