Nintendo can't afford to sell it at a loss now, unless they plan to make it back with the software.

Yes, but I don't see it being 3x the power (as originally suggested) and hitting the $399 price point. 2x the power, absolutely.

10 cents per WiiU loss?

I suspect one reason why the Wii U costs so much is Nintendo's insistence on such a small casing and low power draw.

Probably requires a lot of customization and specific speciality parts. My guess is most of their R&D is actually spent on making sure the console is small too, lol. I hope it's worth it to them. 

They likely could have had a more powerful console for the same price if they were willing to compromise on that or embrace a model whereby they release smaller/more power efficient models over time.

Well you also have to consider the price of WiiU's Gamepad, which will sell for around $150 or so, standalone. It's definitely very, very pricey.

If Sony simply releases PS4 with a standard Dualshock controller, they won't have to spend a fortune on a Gamepad-like controller: money they can use for other purposes (like increasing the system's power). Right?

Yeah that would be complete suicide for Sony, as the Vita is still unprofitable and probably still selling at a loss http://www.videogamer.com/news/analyst_sony_to_sell_2_5_million_ps_vita_by_april_2012.html  .   With it's current financial situation I do presume Sony (for their sake) that they have learned their lesson.  The Wii U selling at a small loss for the time being; could be seen as a good thing.  This probably means that the hardware is sophisticated enough to inflict a loss despite selling for $350. 

Consider it considered. It's most likely the reason why Nintendo is taking a loss on the Wii U to begin with. However, we are talking about a massive increase in power in a limited timeframe. No matter how it's sliced, I don't see a situation where the PS4 can hit $399, have Sony take a small loss, and have it be that much more powerful. 5x the power of PS3 is as far as i'd venture to guess. Still, I admit this is without me knowing when Sony plans to release the console. A lot could change by 2014, for sure.

Power is becoming increasingly important these days. Look at what happened to the Wii.

Consoles needs A LOT more power so they can really distance themselves from those free iOS games. It's the only way $60 retail boxed games can continue to lead the industry. I dread a day where free games like Angry Birds or Temple Run dominate the gaming industry.

Mobile technology moves extremely fast. Vita will be profitable within a year.(if not less)

The hardware is sophisticated. Small, power efficient and it works together. If by "sophisticated" you mean super powerful then you are wrong. Any sort of loss Nintendo is making is extremely small.(it won't break the bank)

Thats interesting. I never saw this coming to be honest. Nintendo of the past few years has not been the sort who would take losses on their console. Interesting to see what direction they are going to take next gen. Do they continue to push the envelope and take the fight a little bit more to SONY and MS, or do they play it cool and keep moving only in their current direction. That is what remains to be seen