Regarding the bolded, you are wrong. They have been making consoles for a long time and I dont see them being unable to make a $400 console which has specs between the ps4 and X1 without turning out a profit at the same time. 

I do agree with you that that may not necessarily get gamers to buy their consoles but it may be worth a try. Especially if their console is still profitable to manufacture and sell. 

 v

In the post-GC era yes, this is Nintendo's console strategy... release new hardware that's slightly more powerful than current gen machines for $$$ reasons, and then try to pretend like graphics and horsepower don't matter at all when it comes to the quality of content on your machine while at the same time ironically promoting the awesome "HD" visuals of your games.

Is it just me or does Nintendo remind you of one of your technologically impaired older relatives who go out and buy a cheap flat screen TV at a discount retail store and watch their programming in standard 480i picture quality because they don't know what an HDMI cable is, all the while proclaiming to you how much better the picture on their new set looks compared to their 20 year old tube TV set?

Also, handhelds are always a generation behind though, because the idea of a handheld is for it to be a portable and cheaper alternative / companion to console gaming. This is why the SEGA Game Gear / PSP / PSV all failed... they tried to match the visual quality of current gen consoles and therefore became just as expensive as the home consoles themselves.

Yes it's true, and there's a good reason ($ reasons) that they decided to do so.

First off, since the Wii/DS, they have been trying to distinguish themselves from their competitors, because they want to tap that blue ocean (aka markets with no/low competition). In that sense, it doesn't matter if the hardware is a gen behind since it doesn't compete directly with the competition offerings (MS/Sony), this way they can make a bigger profit margin on the hardware while also reducing the development costs of games (KZSF devs said that development costs for PS4 is 4x the cost for developing on PS3). Nintendo would be losing WAY more money right now if they went with X1/PS4 specs, and they weren't ready to make pc graphic quality games, Wii U is looking more like a testing ground for the HD development, experimenting with the costs and new art direction of games.

Nintendo is solely a gaming company, that's why they have to make more profit on the software AND the hardware, That is the reason they go with new control schemes/gimmicks whatever you call them: to give you a reason to buy the console/handheld. But at the end of the day, the quality and quantity of games remain the main selling point in this industry, whether you have good or sub-par specs.

Also, on a side note, the loses encountered by Nintendo was mostly because of the big increase in R&D than Wii U sold at a loss (it is most likely breaking even with software), as seen in their last report.

So far wrong it's not even funny. It's vastly more pwoerful than those. People who think Wii U is so underpowered don't know jack about how the system is built. They just look at numbers and think DERP LES POWERFULZ. So the this ignorance keeps getting sread. Without going into a novel sized post. Just sum it up simply. Xbox 360/PS3 mostly used 1k textures. Maybe some 2k. Wii U is able to use 4-8k textures. Wii U is able to run Unreal 4. It had Crysis 3 running on it on good settings and was ready to ship. Wii U is able to run Direct X 11 games.

Want the long version then here. I ran this past my friend who is a developer and my other who is an indie but for years has been an IT guy and says the vid is correct.

The Nintendo 64 was also the most powerful console of the 5th generation.  While the PS and Saturn had their advantages of the CD format, the N64 could produce the best visuals; a much stronger CPU, much better MIP mapping and anti-aliasing, and the Z-buffer sealed the deal at managing convincing 3D.