This question may be too old for most forum members but I'll give it a shot.
When I was a punk kid the Game Boy came out, and it was the greatest thing known to man and I played it non-stop. Then one day a friend of mine showed up to school with a Game Gear. I was floored at how awesome the Game Gear was, it had awesome graphics, and awesome color. I begged and begged him to play it. But then I thought, ah ha, Nintendo shouldn't be too far behind and the Game Boy what ever will come out and it will be glorious. It took Nintendo 7 years to come out with the Game Boy color, and it was basically the original Game Boy with a splash of color. The graphics seemed pretty much the same, it was just crap. Why did it take Nintendo almost 8 years to improve the Game Boy and end up barely any better than where they started, and yet the Game Gear was awesome from the get go?
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And it lacks a good library. It has a few good games, but certainly not as many good games as the GB/GBC had.
Nintendo is not your friend. The only think Nintendo cares about is getting you to give them money as fast and reliably as possible. Nintendo has no interest at all in making a better gaming system, except in the case that this would be requried to continue getting you to give them money.
The Game Boy was making money all that time, largely because it was cheap to manufacture and its games were cheap to produce. If it had stopped making money, Nintendo would have updated it much more quickly.
Never forget. Nintendo is not your friend. Nintendo wants your money.
In the absence of significant competition, Nintendo can get away with releasing hardware that is significantly below what is technologically possible.
There is a significant amount of demand for handhelds and handheld games. Let's face it, Nintendo has a significant majority of it.
So, the simple fact is, it doesn't take very much from Nintendo to beat the competition.
Sure, if they spent more money on it, they could completely annihilate the competition, and perhaps sell handhelds to people who wouldn't buy them if they weren't so awesome - but that would be too expensive for them for it to be worthwhile.
That's why the iPhone doesn't sync over the air, and doesn't need to. If a competitor comes out with a player that has that feature, it still wouldn't be better enough to get enough people to switch.
Because of good business sense, consumer technology will always be in the past.
You're looking at all of this from your own personal perspective. Most people aren't like you, and don't want what you want. Targeting those people is much more profitable than targeting you.
Edit: Rym you do made a good point about my limited world-view, but you kinda have to admit that the Wii could easily have been a better system.
P.S. I never owned a Gamecube. :P
You've not made a single standing point in this thread as far as I can see. As an ad hominem, your grammar has been pretty bad. I hereby declare you the loser in this argument. ^_~
So, in conclusion, Nintendo relies more on profitable business practices and solid technology.
Edit: If you ever have any interest in coming up to Alaska for the awesome skiing let me know.
I own a Wii and I think it is awesome and has a lot of potential. My only beef with the Wii is that a lot of cross-platform games have to cut out a lot of "goodies" for the Wii. To say that I am hopeless, is far from the truth, I pride myself on looking at things from all possible angles, which was what I was trying to do. If you read every thing I have stated, you'll see huge gaping holes, which most are done intentionally because if I stated the filler I would have debunked my own statement. My intention was to bring up new points that I myself have not thought of and discuss those that I need clarification on. All in all I have learned a lot not only about Nintendo as a business but about the people within this forum. Thanks for your time.