They don't WANT Sony and Microsoft's audience.

Not the exclusive audience anyway.

3DS is what they were doing. Sony gets away with it by dumping the C and D-list teams on the handheld (aside from Sony Japan, who does put their best foot forward in that realm). If Nintendo focused all their resources on one side, they would be unstoppable.

Pro tip:

launching and supporting consumer electronics costs a lot more than the parts listed in an iSuppli tear down. 

I think they could do it. The thing with the N64 is that it arrived 2 years after the ps1 and had huge software droughts despite it legacy giving the impression of an amazing + consistent software line up. Not to mention the cost of the games (£60/$80).

The gamecube was the follow up an underperforming system and arrived a year later then the market leader. It would the equivalent of the xbox 360 launching a year after the ps3 did. Also the system was purple and propagetd a very childish image.

I dont think they can compete head to head. Sony and Ms compete in a different buisness world than nintendo does. There game divisions are a small part of a much larger buisness for both of them. They simply can afford to lose millions of dollars in the console buisness while looking toward some longterm goal. Nintendo could not have survived even if they had created the ps3 or 360 even with 80 million in sales. Nintendo will allways only make hardware that they can afford to make. Thats why nintendo may struggle but they will still be in buisness 20 years from now and the others most likely will not.

To capture "some" is the operative word there right? "Some". This is assuming Nintendo is kinda cornered and the

- Cultivate good relationships with PC devs. Make a "New Nintendo Entertainment System" that plays Wii U games + PC games out of the box (so a Wii U + higher end 2015-era AMD GPU in one box for the Western market). Spec the GPU higher than either the X1 or PS4. Keep the Wii U around as a lower cost/more casual/kids friendly option. Support both with the same Nintendo games (1 SKU runs on both).

- Mark a slightly darker Zelda Wii U game. No cartoony graphics (sorry Aonuma).  

- Spin-off the Metroid games into a large sci-fi universe. Make a new bounty hunter and make a more action oriented game with said character.

- Buy up low cost exclusives on some legacy franchises that are dormant like Ridge Racer, Megaman, and Shenmue. Bring some Nintendo classics such as F-Zero as eShop/online titles.

- Reacquire the rights to the James Bond license from EON Productions. Make commercials featuring Daniel Craig and make new games around Bond for the Wii U/New NES/3DS.

- Keep funding/finacing more Bayonetta games even if Bayo 2 doesn't sell like crazy. Build that audience.

- Cut a deal with Square-Enix, joint project mega-RPG that features characters from all three companies (basically the Nintendo Hearts idea), in exchange for FF7-9 remakes on their hardware exclusive.

- Continue making FAMILY franchises! Nothing wrong with that, in fact they are an asset. But lets evolve past a 1950s Disney mentality here. The Harry Potter films are darker/grittier than most Nintendo franchises, lol, and Disney makes bank off Marvel Comics characters that truly appeal to people of *ALL* ages. Mimic that formula -- make family IP, but ones that still have enough appeal that they can resonate with adults as well as kids.

Dont think this is a good idea, as you said, 3 platforms going for the same audience? No thanks.

Nintendo should just do what they were doing before the Wii. Make a powerful console that is on par with the others, developer friendly, indie and 3rd party friendly. Make those crazy Nintendo gems they used to like 1080 Snowboarding, Metroid Prime, Starfox, do some new hardcore IPs etc, they shouldnt go after the dudebro audience but go for the hardcore audience that roam forums. Thats what made them big and people miss that old Nintendo. Shed away that casual image completely.

Honestly, it is doable...

- First, they need to improve their marketing department. It is obvious they don't have the muscle of Sony or Microsoft but, they no doubt can do better then what they have been doing in terms of game advertising. It is one to thing to use the family friendly stuff aimed at parents to sell games it is another to not to properly push individual games on your home console that most probably don't know about or have seen in motion. Especially in regards to 3rd party multiplatform software which is getting killed on the Wii U because the ads aren't cutting it in showcasing that it is on the system.

- Make amends to loyalists and give haters something to choke on via a grand gesture. The Ambassador program for the 3DS worked wonderfully, a similar move could work on a more permanent bases if Nintendo instituted a program that would have digital releases of classic Wii titles either up for sale at reduced prices ala Steam sales or available for limited time rentals. A Steam type regular monthly or quarterly bundle or exclusive sale operation restricted to either early adopters or those that via Club Nintendo or some other means have been shown to have spent a lot on Nintendo products would draw many over to either the Wii U or whatever Nintendo console features it. A rental program they have with Wii Sports Club and Wii Fit U are intriguing but to get the most of such maneuvers it can't just be your casual titles, heck make it not just for Wii games but institute it as a incentive program like Sony has with PS+. Either of these moves or both would provide a carrot that would grab gamers that are on the cusp of getting a Nintendo hardware but just aren't being pulled by the normal Nintendo games over what the competition is offering.

- The hardest thing but the most likely to grab said audience is to create/produce an exclusive game aimed at the Western audiences with impact similar to Goldeneye and Wii Sports in grabbing people. It has to be a unparalleled experience that like those games could only be had on a Nintendo system but it can be done but the best way would be with a new IP or one far removed from norm that you won't have haters saying it is Nintendo doing the same thing they always do all over again. It could be a FPS but most likely the best option would be something that is so heavy in the market but can still grab gamers that prefer either sports or action games. No idea what that would be but from the way the schedule of Wii U releases has been looking Nintendo isn't even trying to aim that much at the Western market save maybe the over the top Bayonetta 2 so...

- Nintendo kills the Wii U and starts again with a new console. Honestly this is a desperation move but if they were to kill off the Wii U, hit the market with a console capable of keeping up with the PS4 or Xbox One and had either traditional controller or improved motion controllers or a smaller Gamepad that allowed for multiple ones to be connected to the system at the same time with the software and marketing push to separate it from the entire Wii U brand while still being backward compatible then they might have a chance to grab more folk then they did with the Wii U which from the jump had people knocking its power and was self sabotaged by bad commercials and a horrific software drought.

That is an easy question. Release a new console that people actually care about and isn't looked at by the main-stream as "last-gen", because lets face it. It's slow, and now since the split, to 3rd party devs. It's harder than ever to make a version for their game. Not only because of the WiiU's bad design (IMO) to be "different".......Again, but because it is vastly slower and dumbs the games down. Not gonna lie, a console like the WiiU really hinders the AI a game can run, and other very important factors that are way overlooked. People just see graphics, but there is so much more, and the WiiU kicked itself. That is why I believe their only shot at this market theft is to discontinue their current console in favor of a less restricted development machine.

Start with baby steps. Show you can.