While the notion of Nintendo buying Ouya is of course idiotic, I do think that Nintendo needed to go the lower-end route with hardware (or maybe just scrapped the whole gamepad idea) and positioned themselves as a much cheaper alternative to MS and Sony, rather than releasing a $500 high-end box and trying to compete with them directly like so many people here seem to think.
What really killed Nintendo is their lack of foresight in keeping the Wii brand relevant. Even though many people scoffed at the idea at the time, they really should have released a "Wii HD" console back when the Wii was at the zenith of its popularity (maybe in 2009 to coincide with NSMB Wii and Wii Motion Plus) to prevent it from being left behind as HDTV market penetration increased. They didn't even need to design a new system, just a Game Boy -> Game Boy Color type of update that kept the same hardware almost entirely intact but with more video memory to allow for a 720p frame buffer.
What really killed Nintendo is their lack of foresight in keeping the Wii brand relevant. Even though many people scoffed at the idea at the time, they really should have released a "Wii HD" console back when the Wii was at the zenith of its popularity (maybe in 2009 to coincide with NSMB Wii and Wii Motion Plus) to prevent it from being left behind as HDTV market penetration increased. They didn't even need to design a new system, just a Game Boy -> Game Boy Color type of update that kept the same hardware almost entirely intact but with more video memory to allow for a 720p frame buffer.