Sony faced this same problem. After working with Nintendo on a CD-ROM drive for the SNES they found themselves on the sidelined, all their work put to waste. Sony decided to get their own back, take the work they'd produced and go it alone - make a console to trounce both Nintendo AND Sega. That machine became the PlayStation, which would go on to define the latter half of the 90's and claim the number 1 spot for itself.
The PlayStation (or PSX, as it was originally codenamed - that name now belongs to another machine in Sony's line-up) is a 32-bit, CD-ROM based console, and was Sony's first entry into a market they came to dominate. Released in Japan in December 1994, the rest of the world September 1995, it was able to produce fully 3D graphics, CD-quality sound, and soon found itself with a massive library of games as eagar developers signed up to join the bandwagon. After being redesigned into a smaller unit, the PSone (as it is now known) still hasn't been retired.
This was all changed with the PlayStation 2's release. With a new console taking priority, Sony redesigned the PlayStation, renaming it the 'PSone', and releasing it in a reduced form factor. With a lower price, and still a huge library of games to choose from, it currently serves as Sony's budget console.