I think they are "cautious" particularly of Microsoft.
Any company that can just cut a check and buy you out overnight like they're buying a new car to put in their garage next to 4 or 5 others tends to do that to you.
If it was just Sony, I think Nintendo would be more open to competing directly. But Sony *and* Microsoft .... nah. They don't want a direct piece of that fight.
Even if they "won" I think in Nintendo's mind they would "lose" because they would be forced to adopt MS/Sony's tactics of losing money, having to pay developers, spending a lot more on marketing, etc. that Nintendo finds unfavorable.
But Nintendo's always been financially a pretty conservative company starting from the 1980s onwards. So that's nothing new. Video games must work as a business for them, it's not a hobby like it is for Microsoft.
It's also easy to sit behind a keyboard and say "go compete directly against this company 5 times your size!" when you have no stake in the fight. If I told you to go fight someone at a bar three times your size, I'm guessing you're going to be a little afraid, even if you are tough. Because you're the one who's going to get your ass beat, I'm just going to be sitting there watching and saying "well I guess that wasn't a good idea".
