The reactions to the OP are quite amusing. Everyone here seems to think that we are the target market and thus if we don't like it then Nintendo shouldn't do it. I like my 3DS but I think everyone here is in denial.
Here's the first thing that you need to understand: the current cell phone subsidy model is absolutely destroying the market for other electronic devices. People have been conditioned to buy a brand new cell phone every two years for $200+ with a contract. Of course the actual cost of an iPhone 5S 16GB is $649, not $200. How do you possibly think that Nintendo can compete with their next portable with a $649 device that is being upgraded on a two year schedule? They can't! People wouldn't even buy the 3DS at $250 at launch! I bought one and maybe you did too but that wasn't enough. Nintendo simply can't build a $200 device that is competitive with a $649 device. Even if they could, they are soon competing with brand new $649 device in two years.
But the 3DS is doing great, right? Wrong. 3DS sales are falling off fast. This time last year they were moving more than 200k a week but now it is more like 100k. The DS sold over 150M units while the 3DS has only sold 45M. The 3DS's screen looks ancient next to an iPhone 5 and will look even worse when Apple launches their larger phones in a few months. Nintendo can't compete with a more expensive subsidized device that is on a two year upgrade cycle. It's over.
I recently spent a week in Tokyo. With 3DS street pass on I ran into a good number of people but in my whole time I saw only one 3DS being used. The subways were full of people either reading books or playing on their phones, not on their 3DS or PSV. Even in Japan I think it's over.
If you can't beat them, join them. If I were Nintendo, I would approach both Google and Apple and offer to release the entire Nintendo back catalogue over the course of several years, with a game or two a week. I would also offer to develop new games. All games would be compatible with a Nintendo branded controller, which would come bundled with one free downloadable Mario game and one free Zelda game. The catch for Google and Apple? Nintendo needs to be the only official game controller and Nintendo needs to get a better revenue sharing deal. If Google or Apple refuses, threaten to go to the other with an exclusive deal.
Of course I don't think Nintendo will do any of this but it's the only path that makes sense in my view.