Yeah, but during the late 90s both of them were kinda loosing the competition to Sony (and later, MS), so it would have made sense to team up in a way, since they were also both dedicated games-companies.
Even teaming up the disadvantages against Sony would still remain the same.
Would Nintendo and Sega teaming up suddenly make them control the cost of hardware as well as Sony which is an electronic conglomerate?
Would Nintendo and Sega teaming up suddenly make their system more desirable for third-party instead of going for the console manufacturer which for historic reason (they weren't really a game company) give priority to third-party?
Would Nintendo and Sega teaming up suddenly opened up their penetration in the fractured european market to compete with Sony which was already established in every country since they were already selling other electronic products?
Would made sense for cash rich Nintendo to buy cash strapped Sega? For which IPs?
Nintendo never had problem to produce hit software.
I dunno the only reason one would dream of a union between Nintendo and Sega is for nostalgia purpose.
They were similar in that both were console manufacturers which operated with the old assumption that a strong first party is needed to lead the spreading of a system since both are gaming company but I fail to see what advantage a synergy between them would have brought to the table.