I saw a lot of shocked reactions when Nintendo announced it would be partnering with another company to make smartphone games. The company was quick to stress that it wouldn't be moving entirely to app stores controlled by third parties: these games will not be re-releases of existing titles, and Nintendo is still working on new dedicated console hardware for the next generation. You shouldn't expect New Super Mario on your phone anytime soon. Basically, their smartphone games will serve as ads for the "real" games.
Unlike a lot of people, I've never really rooted for Nintendo to become a software-only company. Other companies that make that jump often do so to their detriment — look at Sega, which lost a real creative spark when they got out of the hardware business — and it's even more true for Nintendo, which has always explored the physical aspects of gaming as much as the virtual. The playful design of the GameCube controller buttons, or the weirdness of a double-screened handheld, or the runaway popularity of Wii Sports, are the result of designers who are encouraged to hold strong opinions. A touchscreen, on the other hand, is a weak opinion — even no opinion, as it imitates (but never really emulates) physical controls like buttons or joysticks.
But here's the other thing: what Nintendo represents on dedicated handheld hardware, as much as wacky design chops, is a sustainable market. I play a lot of Android games, I own a Shield, I'm generally positive on the idea of microconsoles. Even given those facts, a lot of the games I play on the go are either emulators or console ports, because the app store model simply does not support development beyond a single mechanic or a few hours of gameplay. The race to the bottom, and the resulting crash of mobile game prices, means that you will almost never see a phone game with the kind of lifespan and complexity you'd get out of even the lamest Nintendo title (Yoshi Touch & Go aside).
I don't think everything Nintendo produces is golden, but they're reliable. People buy Nintendo games because you're pretty much guaranteed a polished, enjoyable experience, to the point where they can start with an expanded riff on a gimmick level and still end up with a solid gameplay hit. They're the Pixar of games. And as a result of that consistency, people will pay $40 for first-party Nintendo titles, largely sight-unseen. This creates a virtuous cycle: the revenue from a relatively-expensive gaming market lets them make the kind of games that justify that cost. It's almost impossible to imagine Nintendo being able to sustain the same halo in a $1-5 game market.
There's room for both experiences in the gaming ecosystem. Microsoft, Sony, and Steam will all provide big-budget, adult-oriented games. The app stores are overflowing with shorter, quirkier, free-to-play fare. Nintendo's niche is that they crossed those lines: oddball software for all ages that was polished to a mirror sheen. Luckily, even though observers seem convinced that Nintendo is doomed, the company itself seems well aware of where their value lies — and it's not on someone else's platform.