I don't think that Nintendo is directly competing against Sony and Microsoft with this, and they WILL be the leader of the handheld market (just like they are today).
Technology has come to a point that merging handheld and traditional home console lines is perfectly reasonable, especially given Nintendo's strategy in recent years.
Hell, I'm all for a 100% first party system at this point. I've spent far more hours on the WiiU than on the 'bone and PS4 combined this generation.
Pretty much all of my third party gaming is done on the PC. With the gap between console and PC power larger than ever, I'm really having a hard time justifying to myself a reason why I should even bother with XTWO and PS5.