why companies arent considering nintendo direct competition?

[tuoyo]

Gearbox said:

 

The thing is, is that during the time of the two generation flops, they had almost the ENTIRE handheld market. No company dared enter it then. Now however SONY has a nice stake, thats growing, in the handheld market. This helps SONY in two ways, first it gives them a fall back if their consoles fail, and if Nintendo's next Gen consoles fail, their handheld market will not be anywhere near the size of what it used to be. Nintendo is shrinking, and if they don't win this Gen, then they will SLOWLY fade away. None of the three companies will just give up.

 

However, Microsoft has already said they will not continue the Xbox, so unless they make something new they've basically said they give up.

If I understand you correctly you are saying Nintendo's position in the handheld market is shrinking due to PSP.  I think that is a huge inaccuracy.  DS is on track to outsell all previous Nintendo handhelds so it is far from the case that it is shrinking.  In fact, that is the complete opposite of what is happening.  Likewise Wii is on track to outsell all previous Nintendo consoles.  Plus, and most importantly, Nintendo is making more profits than it has ever done before.  There is no shrinkage whatsover.  Just major expansion.