No, Nintendo shouldn't leave the home console business for the handheld business / mobile market because that will actually make them earn much less money. With both a home console and a handheld, they would make profit from both the consoles themselves and their games.

What they are planning is likely an architecture similarity approach, where both the handheld and their next home console will share the same architectures, with the home console obviously being much more powerful than the handheld, making development on both platforms very easy. Even porting games from the home console to the handheld or vice versa would be easy and lessen development times.

They could still have "two pillars" it just might be something more like ...

Tablet - home console/portable all in one gaming solution

Pocket Handheld - Smaller, pocket friendly, low cost, doesn't connect to a television

And they could maybe get into making other types of hardware pillars like more toy like devices and NFC figurines and so on.

Nintendo needs to remember what made them so great. Third parties bolstering their first party ranks. Sony understood this which is why Nintendo fanfare was so easily lost.

on steps taken by previous generations.

wanna make a bet?
i'll say next-gen will be in between 32&64GB of memory and you say 128+ ?

what is there to bet?/

most gens have gone up 8x-16x

so 512MB in 360 to 8GB (now rumored 12GB)

so if Sony and Microsoft continue the same way it is possible that they will go something crazy. 

the bet is "i'll say next-gen will be in between 32&64GB of memory and you say 128+ ?"

i win if gen 9 has 32-64GB of memory and you win if they have over 64GB,

so you are changing it to you think it is going to have 64 or are you sticking with 128? ;)

That was 20+ years ago now. Nintendo is a different company and third parties I think are going to be massively whittled down in the coming years.

They want to pursue the Hollywood blockbuster movie model, but the truth is the Hollywood blockbuster model only allows for a few huge budget movies every year from 5-6 major studios and that's basically it.

Nintendo I think removed themselves from that path years ago, and if Wii U flops, I think they'll push away from it even further.

They're also more in tune with the needs of the Japanese market, I think if the Japanese consumer rejects the idea of a home console going forward, then I think Nintendo is going to shift away from a dedicated home console as well.

Sony/MS can go ahead and proceed with their 32GB of RAM for next gen or whatever, lol.

Nintendo Cloud-Holiday 2016, $299

Rougly around the power of PS4, fully digital and can be played on the go or on TV.

Market it as a third pillar, Wii U and 3DS will still have about one good year left in them then replace both with Cloud.

Having only one platform to work on would help Nintendo alot, they could basically support it fully on there own and not having to make 2 games of each series would allow for new ips and make sure series dont get huge layoffs.

That's probably asking for too much out of a portable device. PS4 level tech isn't going to be feasible in a handheld for a while and not at that price point. 

Something in the range of a Wii U with more RAM should be feasible in a few years though.

Which is fine. I don't think Nintendo honestly wants much more to make their games with.