Or, they could have gone away from gimmicks and just put out a PS4 clone. Then, they would have gotten all the multi-plats and exclusive nintendo games.
The only thing killing nintendo is their idiotic management. They literally could have just hired a few hardware people from sony or M$ and just put out a x86 machine for LESS R&D money than putting out a new gameplay paradigm.
If they had something similar to a One S or PS slim for $250 for holidays last year, they'd have sold gangbusters. I mean, they could have just ported Mariokart, 3d world, and smash bros, and had a couple big multi-plats, and they'd have sold tons.
How boring and unimaginative.
I challenge the idea that an Xbox One S/PS4 Slim clone would have sold "gangbusters". Or at least, that it would have sold more than the Switch will. I think Nintendo's management is doing what has (almost) always brought Nintendo success: 1. Focus on handhelds, and 2. Think outside the box to give players a unique experience.
Just look at what Nintendo's biggest successes in the past have been. Handhelds are a core business for them and, with one exception, sold better than their home consoles for decades. Then there's the Wii, which found success by giving players a new experience rather than matching the PS3 and Xbox 360 FLOP for FLOP. The DS also left the more powerful PSP in the dust, which I'd at least partially credit to the dual-screen functionality. You can point to the Wii U as "gimmicky", but I'd argue that the Wii U failed both because of marketing and because the "gimmick" was poorly conceived. Nintendo's successes were always easy to understand. The Wii U wasn't, while the Switch is pretty clear-cut. It was obvious from the first reveal just what the Switch is and does. Not so with the Wii U.
As far as matching Xbox/Playstation hardware wise meaning good returns for Nintendo, we actually have a precedent for what happens when they try to do that. Gamecube. And the Gamecube's sales were measly in comparison to Wii. For one, just having the hardware didn't mean third party devs would jump aboard. And second, simply having Mario Kart, Smash Bros, Zelda, etc., wasn't enough to bring in huge sales. If it didn't work then, why would it work now?
And you have to consider the current market. A lot of people already have PS4s, Xbox Ones, or gaming PCs and see no reason to get another system. The handheld aspect of the Switch presents an additional reason to buy it even if you already own a PC or other console. I think that appeal was a key reason the 3DS sold so well over the Wii U (still more 3DSes out there than PS4s)
When it comes down to it, merging their handheld and home console business just makes sense, for both Nintendo and for your average consumer out there who just wants to play some games.