Nintendo has just been building supbar hardware since the SNES. If the deal between Nintendo and Sony hadn't been axed back in the early 90s, the industry would likely look a lot different right now. That, followed by them releasing inferior hardware each successive generation, led to them basically losing a massive amount of third party support that they never got back (and never really deserved back). They scored big with the Wii mainly because the gimmick was well timed, and made up for the inferior hardware and crappy online.
If they actually release top end hardware that third parties can make HD ports or dedicated games on at a reasonable price point with potential for good profitability, and they shop around early enough and convince the devs it's worth their time, I don't see why it wouldn't succeed. They definitely need to reshape their online policies and network as well to be able to compete with the XBL/PSN, but if they're going all out on the hardware for the first time in twenty years I don't see why they wouldn't or couldn't. There is a ridiculous amount of people that would buy a new Nintendo console simply because it is one, and if they managed to make it affordable out of the gate (i.e. $300 or less from the street date), they could score big. 360 got where it is today partially just because it released early with a strong online dynamic, so even if it resulted in MS and Sony stepping up their game for their next consoles, Nintendo would have the advantage if they're actually going top end and pull off it's online well. Especially since any new MS or Sony console is almost definitely going to cost out the nose.
The Wii was pretty huge, it's generally regarded as the lesser of the current generation, but it outsold both of the others by a pretty ridiculous margin and Nintendo isn't exactly hurting. I don't know how well the market is going to handle all three game companies going head on, Wii obviously succeeded because it wasn't competing head on until MS and Sony finally released their own motion controllers much later, but unless they completely screw up the online side of this new console, I'm reasonably confident that they've got the means and ability to challenge the Xbox and Playstation if they decide to step up to the plate.
Also, there isn't any solid specifications or details, even this article just says there are conflicting reports as to how powerful it will be, just that it will at least be comparable. Nintendo isn't really stupid, and I don't think they would try to compete directly without trying to push the bar. If they release even 6 months before a new rival console, never mind a year+, and manage to have hardware that will be competitive with them at a lower price point, I don't know how they could fail. They would have to leave their online network exactly as it is, or completely screw it up in some other way.
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