I think if you are going to look at it like that, then Sony cannot compete either. sony admitted long ago that all the profits they made on PS2 were spent on PS3. They also went from a dominant market share to spending most of last gen in last place. They have continually hurt their brand name time and time again since announcing the PS3. First by being cocky, then by hiding the hack for weeks. Their gaming products are on a downward trend and its too early to tell if that will change with PS4. Vita was going to set the world on fire and its a year or two from ending up like PSPGo.
What Iwata was talking about was a power race. They cant afford to put out the most powerful console like the did before the Wii. Both MS and Sony have made some big mistakes. To single one out over the other seems a bit much to me

So... by that logic, Wreck It Ralph and Les Miserables were competing for the same market?  There are different parts of the gaming market, and Nintendo went for a part that Sony and Microsoft were weak in.

I'm a gamer not a business analysis, can we get Kowen in here?

Look I'm not saying that nintendo can compete in the exact same market but it can compete in the gaming market in general.

Nintendo this generation has taken the red ocean route.

ok, let me get what you are saying here.  You are questioning my dispute of microsoft losing money because some investors supposedly want to sell the xbox division (completely unconfirmed and would never happen and also doesn't prove anything).  Then you go on to say that the 360 did make a profit, like I said...

Iwata is not exactly talking about the power race and BTW sony can most definitely compete especially in this generation and the 5th and 6th. It is nintendo that was arrogant this generation. 

http://www.eteknix.com/microsoft-investor-wants-to-fire-ballmer-and-sell-xbox-division/ (There you go.)

The investors see it as what it is. 

I'm not necessarily arguing about that (although I might later on), but if you read the original interview with Iwata, Malstrom's interpretation of the quote is clearly out of context, and Iwata is very clearly not saying that Nintendo can't be as successful as their competition.

Malstrom is usually right, except when he calls 3D Mario and Zelda failures. They are not mine or his preferred iterations of these franchises, but they are far from failures. In this case I think he is right about Microsoft losing money overall with the Xbox brand the last twelve years.

I also believe Xbone will tank with these macro-economic conditions and high price point, as well as it's shoddy hardware history. They will then exit the console hardware business. if this is the case it will prove the sagacity of Nintendo in not fully embracing competitive and coop online. Nintendo will have waited as long as they could and been justified from a risk/ reward perspective for doing so.

@Bold Yet they said that they can not compete at the gaming market in general even when the wii disrupted the market. Until Iwata specifies what they meant about "competing" I'll take it as though that they were trying to aim to be a leader market instead.