I'm going to refute some of the points made in the argument above. It could even be argued that
Nintendo didn't really ruin
handheld gaming - they invented it (
Game & Watch!) and then perfected it at a time when it was just,
just barely technically
feasible.
Before I go on, I should point out that although handheld gaming probably makes a hell of a lot of money, it has never been at the forefront of most hardware manufacturers (and game developers') minds. It's a side business, something that is easy money for companies with a load of 8-bit properties lying around (I'm looking at you Konami) but not one that you'd bet the company on.
The Game Gear and Atari Lynx (the Sega Nomad was never intended to compete with the Game Boy) were developed around the same time as the original Game Boy, at a point when it was not clear that Nintendo had hit upon the winning formula (of cheapness and lots of good software). The Lynx didn't take off because it was enormous, underpowered for its price, poorly timed and had almost no decent games to speak of. The Game Gear actually did do pretty well for a while (contrary to the above, Sega hadn't lost the plot yet) but again was huge, expensive, battery-hungry and short of decent games. Pengo, Shinobi and Columns excepted.
No one is ever, ever going to spend more for a machine that arguably offers less. Take the N64, the Saturn, the Xbox (mark my words). These machines all will have great software libraries in posterity, but they launch with too little, too late, and for too much. It's the law of the jungle.
The charge of stagnation (in light of such weak opposition, who could blame them?) isn't entirely accurate either. The Game Boy Pocket, Game Boy Light, and Game Boy Color were all minor incremental improvements. The original GB got through batteries way faster and had a much worse screen than its descendants. This inertia to change was the machine's greatest commercial strength - every Game Boy has access to the same vast catalogue of (non-region-locked) software. Even the AGB is backward compatible. Setting this precedent was a positive move for all concerned.
Of course, because the handheld market is a niche one that most people left alone, there was little in the way of competition for the Game Boy throughout the Nineties. Except towards the end, that is - both the Bandai WonderSwan and the sublime SNK Neo Geo Pocket Color wipe the floor with any first-gen Game Boy, and managed to have very decent software libraries. Sony even had a go with the PocketStation. (And then there was the Tamagotchi, and the Dreamcast VMU....)
This does count against Nintendo however - SNK withdrew the NGPC even though it was making a profit, because they forecast that the Game Boy would always control more than 90% of the market. Even now, there are maybe half a dozen little-known machines vying to compete with the GBA (check out lik-sang.com for more info). Just because no-one has beaten the Game Boy doesn't mean there aren't alternatives out there. The market's big enough to support them, if enough people are willing to go and search them out. And if it doesn't happen, well, at least a Game Boy monopoly doesn't suck quite so bad as the Windows one (although both are expensive toys).
Basically, handheld gaming is largely for kids, or a luxury. And it's also notoriously difficult and expensive to get right (hardware wise). Just look at the dreck Palm and Compaq pass off as fully featured PDAs - minaturising minertir minich ... shrinking hardware is an exercise in compromise and pain. Be grateful for what we have, and if it sucks, there's always the PC and home consoles (let's face it, it's not as if you ever see someone playing a Game Boy outside...).