If their hardware is going to decline either way, then a Fusion platform makes more sense. 

It at least will ensure any OK userbase for ALL their games to sell to. Even a giant collapse would mean 50 million Fusion owners, lets say ... that's enough for the company to make a profit from. 

Whereas if they do what some people want, which is get into the super-duper pissing match with Sony/MS, and that platform doesn't sell well ... they likely are looking at very heavy financial losses next gen. 

I wouldn't say handhelds are "dead" in the West either. They just aren't selling like they were in the heyday of the DS/GBA but there's still a market for them, I actually think the future market for dedicated handhelds is more adult oriented than kid oriented (they are crazy about tablets). You look at the very solid New 3DS launch in North America with the success of Majora's Mask 3D and Monster Hunter, pushed by marketing on Better Call Saul/Walking Dead ... that's mostly older consumers driving that. 

I do expect continued erosion in the handheld market, but Nintendo likely will still be able to carve out a decent sized userbase if they play their cards correctly and work their asses off. 

I think they'll get 20 million Fusion handheld units alone out of Japan. Then another 30 million from NA/Europe combined isn't unreasonable to expect, and I'm factoring a massive decline here. Now you're up to 50 million. Lets say another 12-15 million for the home variant, that's 62-65 million hardware units. You can make money off that. It's not the end of the world. Granted yes, it could all go horribly wrong too, but any hardware approach could go horribly wrong for Nintendo, it's a competetive market, there is not gaurunteed formula here. 

Considering how much Nintendo hardware dropped this generation, it's hardly unprecedented. Especially if they fail to learn the correct lesson from this generation.

There's no silver bullet solution for Nintendo, they're in a bit of a tight spot. 

Even if they "correct mistakes" they made 5 years ago, it doesn't mean the future is automatically set for them, the fact of the matter is as far as the mainstream console market goes, I think most people are happy with either a Playstation or XBox, and are unlikely to switch to a Nintendo console unless Nintendo completely shuns the most kid-centric/family friendly aspect of their company. 

Either that or they have find some kind of new miracle gimmick to sell a new system to. 

Likely both of those scenarios are also dead ends for Nintendo. 

I think we'll see a fairly different Nintendo in five years ... games will be a big part of their business, but no longer the only part of their business. The console/handheld business will coallpse into one unifed Fusion platform. Then they will have Quality of Life which will be a seperate other line of business for them. And finally they've merchandising/licensing of their franchise properties which they are branching out more into with the leaks about a Mario CG movie coming from Sony and a Zelda TV series coming from Netflix. Iwata kinda outlined this as being their three pronged strategy for the future. 

Nintendo can do well with their next system if they stop screwing up. Seriously, don't give us dated hardware, don't give us gimmicky things to it that developers won't want to use and actually reach out to 3rd party instead of thinking they'll come to them.

Well isn't the general perception around here that Wii/DS were casual flukes and wouldn't be replicated no matter what? If thats the case then wasn't a massive decline inevitable and the generations before that is what we should compare it to? G&W+NES, GB(thru 96)+SNES, GB(beyond 96)+N64, GBA+GC all sold a little over 100 million, 3DS+Wii U are on track to sell 80-90 million so not the huge decline that many people make it out to be.

They've too much damage to their brand and relationships with third parties to turn things around now I think. Nintendo also fundamentally doesn't believe in competing head on. 

"Nintendo is not good at competing so we always have to challenge [the status quo] by making something new, rather than competing in an existing market.” - Satoru Iwata as of last year. 

That's straight from their own president, lol. 

That's actually a pretty good point. 

I get roughly

99.9 million Nintendo portables + consoles sold from 1995-2000 (N64 + GB/GBC era)

102 million in the GameCube + GBA era (2001-2005)

I'd approximate even conservatively for 90-93 million for the 3DS and Wii U era (73-75 million 3DS LTD, 18 million Wii U LTD). 

Mobile smartphones are a plague on their business to be sure, but maybe they can still reach 75-80 mill for a Fusion platform (then again maybe not, no one knows the future). 

How exactly can you predict the sales of something that you know nothing about? Which may not even exist? You might as well put a blindfold on and start chucking those darts...

True. But given mounting competition from the mobile space, I think a 15-20% decrease from this gen to the next is a safe bet. After that, I think it just comes down to execution and proper support, something I don't see Nintendo nailing, if recent history is any indication.

Considering how little we actually know (such as whether what we're discussing will ever actually exist), it's all just conjecture.

15-20% drop is a much more reasonable prediction than the 50%+ drop u said earlier.