a lot of people forget that the Nintendo DS was hugely popular during a period in which smartphones HAD become the norm (mid 2000s). I don't think that the handheld market is dead at all as long as the hardward is cleverly designed and plenty of software is released. there are many many many gamers who don't find satisfaction from more casual cell phone mobile games and still want a strong gaming experience 'on the go'
I see the dip between DS and the 3DS being mainly due to how well the 3DS did and the fact that design wise the 3DS is very similar to the DS. If Nintendo revolutionized the look of their next handheld it could do better than the 3DS as obviously there still is a huge demand for Nintendo handhelds (my local electronic stores rarely have 3DS's just sitting around these days, although maybe partially that is due to the whole West Coast strike thing)
I think one thing that hurt the 3DS is not having a big enough differential from the DS. sure it has improved graphics, the '3D' quality, and a slightly different button layout- BUT at a quick glance it looks the same. consumers generally get excited about something totally new and different and jump on it. you are going to have a big portion of casual consumers who will just glance and think they already have or had the item because they don't care to look closely. sort of ala the terrible decision to name the Wii's successor the "Wii U' when it had little to nothing to do with the Wii in terms of controls and gaming style
but at any rate, anyone stating that handhelds don't have a future is talking crazy. the 3DS is doing fairly well and might match the GBA (which isn't bad at all). bear in mind some handhelds such as the original Gameboy and the PSP had pretty long lifecycles too. its natural for people to talk crap about the numbers when the DS did so sumblimely, but again, that was a one time thing (just like the PS2) and sort of due to the revolutionary double screen/touch screen at the time
