And the entire industry?  There is a banking on the new consoles to provide a much more compelling case for customers to open up their wallets over say the likes of 99 cent apps?

Because Iwata is commenting on how it performed in the past quarter, not based on what VGC shows for the most recent sales week.  The 3DS was in third place in both the US and Europe.  With the first place consoles selling 50% and 72% more respective to each region.

Really, it doesn't matter how much the PS3 and 360 are selling.  Nintendo originally forecasted 18.5 million for the fiscal year.  Then that was cut to 17.5 million, then cut to 15 million, and then they couldn't even meet that number.  That is why they feel it doesn't have sufficient momentum.  Though I really have no clue what they have been thinking with their forecasts the last several years.  I mean the 15 million forecast was made just two months before the end of the fiscal year.  What could have possibly happened in that time period for the 3DS to only ship 54% of what they expected for the quarter.  They are either misleading investors or completely clueless.

are we talking portable or home consoles? becasue their is overlap between the two but not the same thing. You cant compare a 99 cent game to something you are going to be playing on HD on a TV in your house. As for portable industry, its being affected by phones because that is much closer to 3ds than it will be the PS4/NewBox. 

They both compete for entertainment dollars people have, and if it can be shown that 99 cent apps undermine full price console sales, and games on them, then there is overlap.  Market demands are the industry do what the Wii did, and grow, and show that it is worth throwing investment dollars at.  So, it is important to ask what the sales will be.

The industry is trending downward now, and this year, the software sales are looking to be lower than they have been since the X360 launched.

By VGChartz data, year-on-year, software sales are down from 101.65 million to 83.5 million (for the period from the start of the year to week ending April 20th), or down 17%. That does, however, not take into account digital sales, meaning that the actual drop is somewhere between 12% and 15%, most likely.

 In 2012, 477 million pieces of software were sold. If the drop continues to be about as large as it has been so far, we're looking at between 400 million and 450 million pieces of software sold for the year.

For a comparison, here's VGChartz data for previous years.

2011: 608 million. 2010: 630 million. 2009: 577 million. 2008: 584 million. VGChartz doesn't have reliable data older than that.

However, if you look at The Source's old shipment table,

You can see that no year prior to 2006 saw higher software sales than we're going to see in 2013. I'm aware I'm comparing shipments and sales here, but that ultimately doesn't matter in this case.

In conclusion, the end of the 7th generation (which includes partly the launch of the 8th) is seeing lower sales than we ever did in the rest of the 7th generation, but it's still performing slightly better than it did at the end of the 6th generation. Which means that there's no real cause for alarm quite yet - the 8th generation could very well see just as high sales as the 7th did.

In fact, I'd wager that the 8th is going to outdo the 7th by a decent margin. The current markets (Japan, US, Europe, Australia) are likely to stay on roughly the same size, but there are going to be vastly increased sales in emerging markets, as their economic levels draw closer to ours.

The industry is fine. Nintendo isn't going to do as well in the 8th generation as it did in the 7th, but it's still very likely to be their second best generation yet in terms of absolute sales.