There is no doubt that Hiroshi Yamauchi had great insite into the industry and that he has been mocked for saying things which turned out to be true; consider his 2004 quote:

"I have been saying this for some time, but customers are not interested in grand games with higher-quality graphics and sound and epic stories. Only people who do not know the videogame business would advocate the release of next-generation machines when people are not interested in cutting-edge technologies."

At the time he was openly mocked by (pretty much) every "journalist" in the industry and they used it as a demonstration of how out of touch Nintendo was with consumers; they claimed that this type of thinking was why the Nintendo DS was far less powerful than the PSP which was going to lead to the eventual doom of Nintendo's handheld line. In hindsight we see just how right he was.

The main problem with Yamauchi was that (although he was usually right) he lacked tact needed to implement his vision. Most people don't understand where Nintendo's problems with third parties comes from, during the SNES generation there was far too many bad games being released which was hurting the image of the industry, and preventing the sales of good games. Yamauchi at the time wanted to reduce the quantity of bad games on the system but ended up alienating a lot of third party developers in the process; I can't find specific quotes anymore but the general gist of many of them was that third party developers were awful and took no pride in their work.

I posted this in another thread with a breakdown of how sales would have to go for the Wii to pass the 360 Worldwide in July:

The absolute earliest the Wii could surpass the 360 worldwide is in July.

March 31st, 2007 - 5.84 million Wiis.

If they increased shipments to 1.2 million Wiis a month, this is how it would work out (at full sell out).

End of April - 7 Million Wiis
End of May - 8.2 Million Wiis
End of June - 9.4 Million Wiis
End of July - 10.6 Million Wiis

This is ONLY if they sell EVERYTHING they produce. And this is assuming the 360 is sitting by each month doing nothing, which isn't the case. Being modest, the 360 should sell at least 300,000 consoles a month Worldwide, so, taking VGCharts numbers:

End of April - we'll say 9.4 Million 360s
End of May - 9.7 Million 360s
End of June - 10 Million 360s
End of July - 10.3 Million 360s

So, July is the absolute soonest, unless someone can give definitive reasons why the 360 would sell less than 300,000 a month and the Wii will sell more than 1.2 million a month?

Nope read my sig. End of August for Wii's passage of WW sales of 360.

Nintendo cannot team up with another company for hardware development and keep their traditional advantages. A big part of this "disruptive," "blue-ocean" strategy is being able to both reduce cost and differentiate at the same time, instead of having to pick one or the other. Nintendo's structure is designed to create an environment for continual disruption, thanks to the joint development of hardware and software in one organic process. This process allow the hardware and software to sell based on the seemlessly integrated experience they create and on their innovation and newness (or novelty if you prefer), instead of selling based on traditional cost-increasing differentiating factors like more powerful hardware or more content in games. When Nintendo says they will never leave the hardware business without also leaving the software business, they mean it. Hardware and software are the two halves of the same toy, and they cannot complete their creative vision without total control of both. They created Wii and Wii Sports at the same time, and we couldn't have Wii Sports without having the Wii exactly how it is. If they were developing as a third party, they would have to sell Wii Sports as a standalone game with special accessories, and Miis would have to be part of the game instead of part of the hardware, making it virtually impossible to turn the game into the mega-killer app it is today... and then they'd have to pay fees to the console maker! If they worked with another company to make Wii, that company would probably have its own vision for gaming hardware, and it would be impossible for Nintendo to design hardware and software with one group of people in one room all at once. You can see how important this is to Nintendo in the fact that Gunpei Yokoi, a supposed hardware guy, directed some mega-hits for Nintendo, including Super Mario Land. Meanwhile, Shigeru Miyamoto, a supposed software guy, was Yokoi's protege, and led the Wii development team! Its all the same process to Nintendo.

Is there gonna be more end of PS3, end of PSP or nightmare in America or nightmare in Japan threads? Sound like you guys should make horror movies with all these 'nightmares' for Sony...

Until Sony expires or turns things around, yes.

 I agree with the rest of your post, but Nintendo cannot pass up a chance to collaborate with Sony.

 Nintendo's corporate mentality is still one of survival.  In fact, it has explicitly stated that it hoards large amounts of cash so that it can survive during the lean times.  The video games business is supremely competitive and Nintendo, and despite its success with the DS and the Wii, understands that well.

Collaboration with Sony essentially takes out a crucial competitor, and there's no way Nintendo wouldn't like that.

But how will Nintendo maintain their integral advantage?  Iwata stated that he's very proud of the fact that at Nintendo, hardware and software games work in the same building.   He's very proud that at Nintendo, hardware is created at the demand of gaming ideas, not the other way around like PS3 or 360.

It depends on just what this "collaboration" is.  Sony understands the reason behind Nintendo's success, thus a collaboration would only be worthwhile given Nintendo strategy is intact.  It is a very delicate balance, and not at all easy to pull off.  But hey that's the executive's job to figure out this optimization problem.  The synergy is too immense for them to ignore.

I'd go to the following link and align launches and weekly sales, at the same time or one at a time and you'll see that the PS3 is dong fine. The only reason you see this giant gap in the holiday season of 2006 is because of Sony's supply constraints. Not to mention Sony is still having supply constraints. Take some time to think here. How is it that when I get a paper advertisement from Bestbuy and only see the 360 being advertised as a special and no PS3 in sight? Well, Best Buy only advertises something when they are sure it is going to be in stock, meaning a minimum of a certain number of units per store. Some stores have PS3s stacked higher than mount olympus and some have only 2. In my area there are only 2 per store (I've actually counted them because I was looking for a certain game), so how is anyone going to know about the PS3 when it's not even being advertised on the paper advertisements from Best Buy? Sony is doing their part in advertising on TV and what not, but those advertisements suck. I personally prefer advertisements Best Buy do (showing games and remotes and the system itself).  :

http://www.vgchartz.com/hwcomps.php?cons1=Wii&reg1=All&cons2=PS3&reg2=All&cons3=X360&reg3=All&align=1

The link sheds light on the PS3 regardless of its current situation. In reality, the PS3 is still on track. I just don't get it. Whenevever Nintendo and Microsoft trip it's a case of "Oh they'll be ok," but when Sony trips it's a case of "OMG PWNZERD BY M$ AND NINTENPWNS!" I rarely post in this forum but I read a lot of what's going on every once in a while. One thing I noticed that this site has a lot of people who favor one console over another (fanboys) and people just going for the underdog. Sony has been on top for the past 2 generations and people want to see Mayweather beat De La Hoya because there's this certain need to see a giant mainstream figure fall to an underdog.

Personally, I'm a PSWii fan, I don't like the 360Wii combo. I used to have an Xbox in the past generation, along with all other consoles, but the Xbox might as well been called the "Halobox" because in reality, that's the only selling point it had. 

 People need to quit being childish during these mild situations.  Especially when they say there are no good games on the PS3. Lets go back in time. 

360 day one: ....Perfect Dark Zero (not good at all) and uh, Call of Duty 2 with last gen graphics. 360 fans had to wait a year before they got Gears of War, their first true killer app. 

PS3 day one: Resistance (killer app seeing as to how 1/3 PS3 owners have it), and Call of Duty 3 with next gen graphics, not as good as 360, but at least not last gen graphics.  PS3 is about 6 months old and it's already getting  games like Motorstorm and about to get LAIR (1080p, excellent graphics, 7.1 surround sound, and all that crap Sony promised in 05) in July or something like that. PS3 is going to have at the very least  2 killer apps (MGS4 FFXIII)  when it turns a year old, whereas 360 had only 1, Gears of War. That's already ahead of the 360's 1st year record.

 In regards to people saying PS3 has better graphics, or 360 has better graphics, for now they are they same.  I'm pretty sure one of the two is going to come out on top in about a year when devs start to know what the hell they are doing.

One of the things that hardly gets a show and tell recognition is Resistance:FOM. People fail to see beyond the trailers and what not. I like Gears of War, but it's a rental for me. People made it out to be more than it really was. The game is repetative. Ok you run into a section of the stage, kill 5-10 monsters, run to another section, kill 5-10 monsters, beat a blind monster, run to another section and kill 5-10 mosters again and so on. You never get to see a good major battle. Resistance had a different approach, like the mission where you're in Manchester shooting about 40+ monsters in one battle, all simultaneously doing their own things against your 15+ allies who are also simultaneously doing their own things. That's a great feature to me, don't know about you guys. Don't even mention Call of Duty 2&3 because that is poor AI for next gen consoles. It's so easy to shoot 50 nazis coming from one door way. Especially when they do the same thing; catch your bullets.

 There is also the blu-ray player, and that's self explanatory. Longer games, period. I was soooo tempted to get a 360 a few months ago, but after playing Rainbow Six: Vegas and Gears of War I just couldn't do it. Don't get me wrong, they are great games, but the thing is, they are horribly short! It's like buying the greatest hamburger in the world and only getting 1 bite out of it...and it's over.

Then theres the GTA:IV thing going on. I don't care if 360 gets a whiff of GTA at the same time PS3 does. More happy gamers. But when Rockstar games has to shaft PS3 gamers because they have to make it fair for 360 gamers then it's getting ridiculous.  They have to make it compatible with 360's that don't have HDDs or bigger formats (DVD9, but no HD-DVD or blu-ray?)... Sure, Rockstar games are to partially blame for this, but it's mostly Microsoft's fault for making an Xbox1.5. 

No planes and a smaller world than San Andreas...ouch. 

Collaboration with Sony essentially takes out a crucial competitor, and there's no way Nintendo wouldn't like that. Collaborating doesn't "take them out," it just ensures them some of the benefits of being in the market. When insularity is such a great asset to Nintendo, why would they want to share profits with anybody? Threatening your traditional advantages while reducing your potential gain doesn't sound like a smart plan to me. Nintendo are trying to make Sony irrelevant. Maybe there's a case of "If you can't beat 'em, join 'em," but Nintendo plans to beat 'em. They plan to absolutely change the rules of the game so that a system like PS or PS2 is not even worthwhile for Sony or anyone else to make. They want to change the rules so that they can only lose if they are out-innovated.

FOOD88: "Not to mention Sony is still having supply constraints." No, they aren't. http://news.morningstar.com/news/ViewNews.asp?article=/DJ/200705160504DOWJONESDJONLINE000451_univ.xml&Cat=AsiaPac "TOKYO -(Dow Jones)- Sony Corp. (6758.TO) said Wednesday that of the 5.5 million PlayStation 3 units it shipped last fiscal year, 3.6 million were sold to retailers." 1.9 million PS3's are somewhere in transit, and according to vgcharts, they've only sold 3.3 million of the 3.6 million that were shipped by the end of March. If you can't find a PS3 now, online or in stores, I don't know what to tell you. FOOD88: "people want to see Mayweather beat De La Hoya because there's this certain need to see a giant mainstream figure fall to an underdog." Uh ... Mayweather did beat De La Hoya. Well spotted. FOOD88: "PS3 is going to have at the very least 2 killer apps (MGS4 FFXIII) when it turns a year old." The chances of them releasing MGS4 and FFXIII this year are so close to zero that it's best you should expect them in 08, leaving them with no killer apps. Resistance: Fall of Man is the only must have game for the system right now. FOOD88: "There is also the blu-ray player, and that's self explanatory." Yes, it explains the delays in getting the PS3 released, as well as part of the reason for the enormous price tag. FOOD88: "Sure, Rockstar games are to partially blame for this[GTAIV "downgrade"], but it's mostly Microsoft's fault for making an Xbox1.5. " Actually, the blame falls squarely on Sony's shoulders. You see, if they had delivered a great system on time with no delays and had a decent install base, GTAIV would've been exclusive. Unfortunately, the 599USD announcement was a betrayal to more than half of the folks looking to upgrade from PS2 to PS3. So, Rockstar, caring about money, thought they would be able to sell more copies if they made it for the 360, as well. To say the PS3 is doing fine now for a system that costs 600 bucks means the system isn't doing well at all. I don't care how you slice it. The Playstation brand is bleeding marketshare at an alarming rate, and Sony has to do something to turn things around, and FAST, or they will settle for third place this gen.