The 3DS is saving them right now, its clear the idea that a serious gamer (and its a significant market) will move wholesale to touch devices is not true. People will buy a whole extra device to play good games, they would be mad to destroy that market. Strangely Nintendo was right on the one thing everyone thought was obvious, the iPad/iPhone is nothing like the threat the gaming press/analysts made it out to be.
However they are getting destroyed by Microsoft, Sony and Steam on the big screen experience. One option i see is for them to double down on the the price difference. Sony has been making steps in that direction with the Vita TV. Although Sony's motivation seems to be the opposite, to boost Vita software sales and make that a more attractive platform for developers.
Nintendo needs to beat Microsoft and Sony significantly on price with an Apple TV size device, and here is they key: a top class streaming service. Nintendo has a back catalog of IP to rival Disney and they need to be using this in more than just a few Virtual Console releases a month.
There is the opportunity for them to become the Netflix of gaming, and Sony again has a head start with Playstation Now. Of course they continue to make traditional games that run on the local system, but they must bring something else to set them apart.
All this is possible for their next console, a "Wii HD" can be crammed into a tiny well priced box, and Sony is testing the waters on streaming. The big question is can Nintendo pull off the technology platform required?