Satoru Iwata mentioned in a recent interview that the company had a new handheld all set to go in the last three years, but ultimately decided to scrap the plan. Speaking with CNBC, Iwata declined to give any further details about the product, but did say that the most important thing for Nintendo when releasing new hardware is to maintain "momentum." Iwata implies that the new handheld would not have accomplished that goal.
History lesson time: Many moons ago Nintendo discussed the "three pillar strategy" for its hardware. It was to be the console (Gamecube, then Wii) and the two handhelds (Game Boy and DS). With the runaway success of the DS, and now the DSi, it seems the third pillar became vestigial. Perhaps one day we'll see what this mysteriously scuttled handheld was meant to be.