Shield is aimed at killing consoles/handhelds, and selling video cards. Not sure how that can fail. Anyone with a console or thinking about purchasing one and already has a PC is a potential customer for this. If my PC games can run on a TV I have no need for the next xbox/ps4. You get android games for walking around and pc games when at home (well, both can be output to tv). I don't think you can get the same gaming experience on a phone as you can with a gamepad/lcd. You just can't do the same things you can with a dpad/sticks and lost of buttons. You are and always will be limited by a phone's touch interface.
Even if they sell it at or near break even, it will hurt AMD, consoles and handhelds. Which I believe is the point. They can charge more (for decent profit) for round 2. The first should be to just cement their GPU lead (they own 67%+ of the discrete market vs. AMD ~25%) and cause fewer consoles sales which currently hold back their gpu sales. Games are made for consoles and ported to pc, thus holding back your need for a powerful gpu. If consoles are dead we get games made on PC etc, and needing more power. Hence I can sell you a needed upgrade that will actually show a difference on your pc.
I think a lot of you are missing the point of shield and how NV looks at consoles as basically the enemy of expensive gpu sales
Also ~5in screens are sold for profit at ~$150 in car dvd players etc so I'm not sure why someone can't sell a gamepad with less heat/watt restrictions for a profit at even $200 or so. I men Ouya will sell for $99. A screen can't cost more than $100 or those car dvd players wouldn't exist. Ouya comes with the console and the pad for $99 AFAIK. I'd think NV could break even or make a profit at $150 for shield. Priced aggressively this could be a massive success vs. $300-500 next gen consoles. It would inspire some gpu sales also as your pc is upgradable for a long time to come. Your x720/ps4 can't be taken with you for games on the road in say, a doctors office etc. Of course on the other hand it will sell like crap if it's $400. Vita and 3DS sales are already plummeting as phones kill them off. Shield will add to the damage with PC games on TV as another reason to not buy a handheld.
If shield sells well (IE priced right) consoles will have an even tougher time from Nov+. If they were out now they'd be able to defend themselves before shield/ouya and phones get an even bigger beachhead built. But coming at xmas hurts them. Steambox is a wildcard, not sure when it will debut, but having steam as a platform should ensure some form of success. Of course Shield working with steam also helps it, as steam customers are an easy target for these too.
Here's a forbes article laying out basically what I'm saying, she's not alone as others are saying it:
http://www.forbes.com/sites/carolpinchefsky/2013/01/15/why-steambox-and-shield-may-cause-the-death-of-consoles-as-we-know-them/
The writer makes a lot of sense and I think is on the right track for what NV/Valve are doing here.