I would like to see Sony bow out of the handheld market but come to an agreement/partnership with Nintendo to work as a partner with them actually.
No point in fighting when Apple/Android are the bigger threats.
Sony conceeding and helping out Nintendo is a good thing, I think Nintendo would accept and it would position Sony well for perhaps a more broad partnership with Nintendo 5-10 years down the line when the traditional "console" concept perhaps starts to evaporate entirely.