Nintendo right now is in dire straights in the handheld market. Smartphones are rapidly growing and are unseating dedicated handheld gaming devices. Why have a 3DS when I can have a smartphone that plays any game I want? People only want to carry one device.
However this is also a big opportunity for Nintendo. Imagine if they ported all their old games to smartphones, such as Pokemon, and selling them for $5 each? It will take little effort (just optimizing controls for touchscreen) and would bring in millions. However they continue to shun smartphones stating that Nintendo games must be played on dedicated hardware. In my opinion, Nintendo is being blind and arrogant to this huge threat, and if they don't adapt, they will suffer in the long run.