IGN cites multiple sources indicating that a hardware reveal of some description by Nintendo is forthcoming, and there are even some early indications of what that might be.
The primary rumour is that the hardware is actually neither a direct successor to the 3DS, nor the Wii U - but both. A combination called Nintendo Fusion DS and Nintendo Fusion Terminal that will function as both an independent handheld device, and as a 'base system' console. The rumoured specs detail a base system that is somewhat more powerful than the Wii U (but remains on the same architecture, continuing to place it apart from the Microsoft and Sony consoles), but maintains the ability to play Wii U titles, along with new 'Fusion' titles as well as a 3DS card slot.
The handheld 'Fusion DS' specs, meanwhile, follow the 3DS on a very similar path (and, as with the 3DS, use a load of custom components that make it hard to pin a general level of power on), but ape the PS Vita in including dual circle pads, 3G and Bluetooth - along with a fingerprint scanner, because everyone has to have one of those these days. Possibly the biggest walkaway from other Nintendo touch devices is that it boasts a capacitive screen (like your phones) instead of the resistive screens of the DS, 3DS and Wii U.
One other thing it may also have, according to a patent filed by Nintendo recently, is the ability to swap out the four main input areas for a customisable controller - though there are some points (such as motorised circle pads for haptic feedback) that possibly mean these two possibilities cancel eachother out.
The source on the above specs is apparently reliable, but it's also worth pointing out that they come with a slight level of detail that we don't even have for the Nintendo devices that already actually exist - because Nintendo just doesn't normally make that stuff common knowledge. Although, if the source is in a development role, there's a good chance the NDA that they're breaking comes with a level of extra detail.
As crazy as the idea of a combined console and handheld sounds, the fact is that the writing has been on the wall for this idea for some time. The Wii U is not that far removed from the idea as it is - the Gamepad is already a limited, tethered handheld controller, and that same idea has been explored even more thoroughly by Sony in the relationship between the PS4 and PS Vita.
It's also one of the few logical paths left for Nintendo to travel on in the console space. The Wii U is a demonstration that Nintendo's falling-back from the main competition with Sony and Microsoft has put it at a massive disadvantage in the home console space now that these devices are not only about a lot more than just games, but effectively developed in an entirely different world than Nintendo is prepared to move into. The shared architecture of the PS4, Xbox One and PC make them almost homogeneous in terms of development, and this is the future of non-handheld development. Nintendo can either choose to get back into that race with a very powerful machine that can directly compete with the PS4 and Xbox One, or they can choose to get out of it entirely and walk their own path. That same decision is the one that they had to make for the Wii U in the first place, and despite being a relative failure for it, it's unlikely that they'll change tracks now.
The handheld side of Nintendo's business, meanwhile, has seen off every challenge set on it with (eventually) deft aplomb. The PSP was meant to kill it, the PS Vita was meant to kill it, Android and iOS were meant to kill it - even the 3DS itself was meant to be the final downfall of the entire handheld division after it massively stumbled after launch. However, despite it all, the 3DS is now enjoying levels of success relative to Nintendo's best platforms. Nintendo's handhelds (not in least thanks to Pokemon), are a reliably strong field for the company and have something that the Wii U does not - a lack of direct competition.
It has stood to reason for a while, then, that the most likely outcome of the Wii U's failure and the 3DS' success, is that the handheld business would take over the console business and that the two would become one. One part home console for playing more beefy games on your TV, one part handheld for playing games like Pokemon on away from your couch - and combined together, the ability to stream your console game to your handheld for portable off-TV play of your combined system library. And the fact that you can already do the majority of this through the Wii U and PS4/Vita today is what makes this Nintendo Fusion rumour so viable - it's actually the only logical next step.
Of course, the Fusion remains just a rumour and there isn't very much available to back it up yet. Likewise, Nintendo bringing hardware to E3 may be very credible at this point, but it could simply be a revision (ala the 3DS XL) rather than a brand new machine. However, with the Wii U failing to find any traction, it really doesn't sound like a bad idea for Nintendo to cut their losses with the hardware itself, while maintaining software support. In fact, it's really hard to see where else to go from here.
One way or another, we'll find out for sure in just over a month when Nintendo hosts their E3 Nintendo Direct (again, no press conference this year) on the 10th June.
Update:
Nintendo UK has made the somewhat uncharacteristic move of denying the rumours. But, then again, it's nothing new for a Nintendo UK representative to lie (or be legitimately in the dark) about the status of an upcoming hardware reveal...
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