Isn't Sega a Japanese company that dropped their consoles and went software-only? They're still in business and doing well. If you've been to Japan and have seen or played Border Break (an arcade-only game), you know they've still got it. They also still make Sonic games.

There's no reason that Nintendo couldn't follow suit. Pride is probably the biggest obstacle preventing that from happening, but if/when things get bad enough, they'll make the switch.