The New Yorker writes that Nintendo is fine with third place. Between Sony and Microsoft both trying to build the most comprehensively next-generation console, and barely breaking even in their efforts, Nintendo decided to go a different route. Wii doesn't have all the bells and whistles, but it focuses on simple fun playing games--a strategy which turns out to be much better for Nintendo's bottom line and stock prices. From the article:
A recent survey of the evidence on market share
... found that companies that adopt what they call "competitor-oriented objectives" actually end up hurting their own profitability. In other words, the more a company focuses on beating its competitors, rather than on the bottom line, the worse it is likely to do.
This sounds like the strategy that Apple adopted out of necessity a few years back.