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Soundwave said:

I think a hybrid machine at the center of it all is their best bet. 

A traditional portable will likely fail in the long run too ... it's not "cheap" enough to compete with tablets which are less than $200 and have free games. 

There's no point in trying to win on "cheap". The Vita is $200 too, it's not as if its sales exploded through the roof, the 3DS bombed at $250 because Nintendo had mediocre hardware for that price and no games to play. 

A hybrid machine isn't happening though. It's not their best bet. It's not even on the betting table.