People need to calm down a bit. They've never said anything about stopping producing home console games with high end graphics. Why would people assume that's their plan?
I imagine they are going to be making a handheld console that is android based, and a home console that has an OS which is also capable of running these games designed for their android based handheld.
I picture it as an updated version of the Super Gameboy or the Gameboy Player, reimagined for the internet age. Your home console can now run your entire library of handheld games. Of course there will still be games targeting the console specifically (likely primarily comprised of games developed by Nintendo, the handful of externally developed games that they negotiate exclusivity on, and the admittedly meager selection of ports that are available for Wii U right now), but on top of that you'll get a huge shared library of games across both devices.
Other potential benefits that this news brings:
Maybe Nintendo will discover modern touch screens, and ditch their low resolution touch screens based on tech from the 80s (720p/ + capacitive would be what I'd hope for).
They'll probably be able to ship a "NX Handheld" and "NX Handheld XL" with something approaching pixel density parity.
As a long term strategy, they'll probably be able to push backwards compatibility even further.
They will maybe be the first console manufacturer to ship a console with a web browser that's good enough to be actually usable.
If it is possible to sideload apps (likely won't be supported out of the box, but will probably be hacked), then there are a ton of great Android emulators, which are all developing at a fast rate. PSP, Gamecube/Wii, Dreamcast, and most of the older systems too.
I think there are far more potential positives than negatives here.