The Wii basically was a microconsole.
Nintendo essentially took the GameCube, made a very small upgrade to it, repackaged it in a slimmer casing, added a new controller and charged $250 for it.
If Nintendo could have made the Wii smaller they would have, it just wasn't feasible to have smaller components in 2006.
In 2016 ... ten years later ... now that we have rapid advances being made to mobile components and a disc drive isn't necessary really (3DS style cartridges will be able to be 16GB-32GB soon enough the same size as a Blu-Ray disc) Nintendo can effectively make a console more powerful than a Wii U that fits into your pocket.
The iPhone 6 chipset is fairly close to a PS3/360, it's just that no devs will make a game just for the iPhone 6 (it has to work with iPhone 5 and even 4 in most cases so graphics are held back).
So a "microconsole" that's a moderate upgrade to Wii U in terms of visuals ... this wouldn't really even be anything all that new to Nintendo. They have effectively done this before.
Look at the Wii U even ... slightly more than half the system size is basically the disc drive, remove that and it's fairly tiny:
Now use mobile components instead (bye bye fan) and you would have a device that's incredibly small.
