I do not think Nintendo needs to think about quitting the hardware business at this point. I do believe they need to unify their platforms (this does not mean having one console, but their portable and home consoles should be cross-compatible to a certain extent in the future; or at the very least allows for easy porting across the two platforms), because right now it is difficult for them to handle developing for two distinct platforms at once and it will give third-party developers some incentive to develop for their systems again since they are targeting two systems with one piece of code .
However, hypothetically speaking, lets say their next-gen is a complete disaster (at which point I would say they should start making some tough choices; by the way, I consider them losing money again for a prolonged period of time a disaster not not being the number #1 in console sales). In such a scenario I would much rather Nintendo go second-party rather than third-party. Firstly, by clearly communicating to their fan-base that they have a targeted a specific platform they can avoid the issue of platform fragmentation (which is caused by fans dispersing to different platforms). Secondly, they would avoid the issues of porting, I read a comment above saying that Nintendo will get used to it, but porting will always be an additional cost and Nintendo has history of delaying games even on consoles they are familiar with (I am talking about N64, GC, Wii) so I expect developing for 2-3 platforms to take a huge toll on Nintendo.
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