Joke comment:
They are failing because of Iwata's insatiable appetite for bananas which is bleeding them dry...
Serious comment:
I've said this elsewhere, Iwata is to blame because he thought they could ride the Wii coat tails and Nintendo got complacent (look at the 3DS's first year) and thought all those owners would come along and support the Wii U blindly (again it is a very stupid name, if people couldn't differentiate between both systems) and support Nintendo like they did in the past.
Secondly Miyamoto is partly to blame (but not solely as I don't think he makes all software decisions) but they have rested on their laurels Pikmin was the last major series they created and backed a lot, sadly even though it has it's fans it didn't turn into the massive hit they were looking for (has Miyamoto lost his golden touch?)
And on that front, they allow some of their veteran designers to release less than stellar games which hurt the overall properties (Metroid: Other M anyone) and then decide to let the property lie dormant until it's dead again. Or on the flip side finally release a followup then say well maybe in another 5-10 (or 25 years, so says Kid Icarus). They leave old and respected IP's dead, don't do enough with fan favorites (F-Zero), and release way too many Mario games giving the all too real impression that they release nothing BUT Mario games, and can you blame anyone for thinking that.
They need to go back reassess their good properties, make games for them, regardless of their potential super success (Nintendo has a bad habit of only releasing and even worse localizing games that will sell 500k or more, and deem anything less than that a massive failure and abandon it) But as they've seen Fire Emblem has become a important property for them (and one they've unfortunately relegated to handheld purgatory) but it's taken quite a long time for them to see that because the series was a extremely slow burner in sales while people discovered and got to know the game (the high prices of the older localized games didn't help either to reduce that entrance barrier)
They need to give the fans what they want, get more development teams to meet the challenge of current gen development, leave the gimmick based console at the door for a cycle or two, especially if it does NOT enhance the gameplay, (See how MASSIVE motion control gaming is...oh wait) and use their well established legendary stable of IP's in a more effective manner and not let properties languish for 25 years.
Nintendo needs to get with the times and not rest on their laurels thinking that well enough is good enough, they have the product people want, they just need the manpower to produce it and the ability to know what the fans want and the foresight to give it to them on a platform they want to play it on.